<PAGE>



                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


      [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                       EXCHANGE ACT OF 1934 [FEE REQUIRED]

                   For the fiscal year ended December 31, 1999

                                       OR

    [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                     EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                        For the transition period from to

                        Commission file number: 33-37078

                    FNC BANCORP, INC. (A GEORGIA CORPORATION)
                I.R.S. EMPLOYER IDENTIFICATION NUMBER 58-1910615
                420 SOUTH MADISON AVENUE, DOUGLAS, GEORGIA 31533
                        TELEPHONE NUMBER: (912) 384-1100

           Securities registered pursuant to Section 12(b) of the Act

                                      None

           Securities registered pursuant to Section 12(g) of the Act

                      Common Stock, Par Value $1 Per Share

Check whether the registrant  (1) has filed all reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes X No ____

Check if there is no  disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation S-B is not contained herein,  and will not be contained,  to the best
of  registrant's  knowledge,  in  definitive  proxy  or  information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. [X]

The registrant's total revenues for the fiscal year ended December 31, 1999 were
$6,002,548.

As of March 1, 2000,  registrant had outstanding 416,136 shares of common stock,
$1 par value per share,  which is registrant's only class of common stock. There
is no established market for the common stock of the registrant.  Therefore, the
aggregate  market  value  of the  voting  stock  held  by  nonaffiliates  of the
registrant is not known.

                       DOCUMENTS INCORPORATED BY REFERENCE


                                      None
<PAGE>
PART I.

ITEM 1.  DESCRIPTION OF BUSINESS

The Company

     FNC Bancorp,  Inc. was  incorporated as a Georgia  business  corporation on
September 19, 1990, to serve as a bank holding  company for First  National Bank
of Coffee  County.  The Bank began  operations on September 23, 1991, and is the
sole subsidiary of the Company.

     The  Company's  offices are located at 420 South Madison  Avenue,  Douglas,
Georgia and its telephone  number is (912) 384-1100.  The Company  maintains its
offices at the office of First National Bank of Coffee County at this address.

     The Company's  principal  business is the  ownership and  management of the
Bank.  The Company was organized to facilitate  the Bank's  ability to serve its
current and future customers'  requirements for financial services.  The holding
company  structure  provides  flexibility for expansion of the Company's banking
business  through the possible  acquisition of other financial  institutions and
the provision of additional capital to the Bank. For example,  we may assist the
Bank  in  maintaining  its  required  capital  ratios  by  borrowing  money  and
contributing the proceeds of that debt to the Bank as primary capital.

The Bank

General

On  August  15,  1990,  the  Organizers  of the  Company  and the Bank  filed an
application  with the Office of the  Comptroller  of the Currency to charter the
Bank as a national  banking  association  under the name "First National Bank of
Coffee County" to conduct  business in Douglas,  Coffee County,  Georgia and the
surrounding  area.  The  Organizers  of the  Company and the Bank were Robert L.
Cation,  Milton G. Clements,  William C. Ellis,  Jr., Ralph G. Evans,  A. Curtis
Farrar,  Jr., Norman E. Fletcher and Timothy J. Palmer.  The Bank was authorized
to commence its banking  business by the OCC issuing a national bank charter for
the  Bank.   Operations  commenced  on  September  23,  1991.  The  OCC  granted
preliminary  approval of the application on December 14, 1990. Final approval of
the application was subject to, among other  conditions,  capitalization  of the
Bank at a minimum of $3,500,000 prior to the Bank opening for business.

     The Bank's  business  consists  primarily of  attracting  deposits from the
general  public and,  with these and other  funds,  making  real  estate  loans,
consumer loans,  business loans,  residential and commercial  construction loans
and other investments.  In addition to deposits, sources of funds for the Bank's
loans and other investments include  amortization and prepayment of loans, sales
of participation in loans, sales of investment securities and may include in the
future, sales of loans. The principal sources of income for the Bank is interest
and fees  collected on loans and, to a lesser  extent,  interest  and  dividends
collected on other investments.


                                      -2-
<PAGE>


Philosophy and Strategy

     The Bank serves as a community bank in a market dominated by large regional
banks.  The  philosophy  and  strategy  of the Bank is to  emphasize  its  local
ownership and management and its prompt and responsive personal service in order
to  attract  customers  and  acquire  a market  share  now  controlled  by other
financial institutions in the Bank's market area. Most of the shares sold in the
Company's  public  offering were sold in the Coffee County area,  and this local
ownership has helped to provide an immediate customer base. The Bank's President
and the other Organizers also have significant  contacts in Coffee County, which
has provided additional customers and is expected to continue to do so.

     The  Bank's  strategy  is to  attract  as  customers  small to  medium-size
manufacturing, retail, professional and industrial businesses as well as middle-
to upper-income consumers and professionals. These customers typically provide a
higher  level of  profitability  and a lower degree of risk than do customers of
the larger  banks and are prime  customers  of smaller  banks.  As more and more
small  banks are merged out of  existence,  the  opportunities  to fill the void
created by these  mergers  are  enhanced  for small de novo banks that have both
adequate capital resources and experienced management.  The Bank's President has
experience in servicing these types of customers at other financial institutions
and uses that  experience  to  continue  to provide  services  to these types of
customers.  See "Item 10.  Directors and Executive  Officers of the Registrant."
Management  of the Bank also has an active  officer and director call program to
describe the products,  services and philosophy of the Bank to both existing and
prospective customers.

Market Area

     The Bank's primary service area is Coffee County,  Georgia, and the Bank is
located in Douglas,  the county seat and largest city in the county.  The Bank's
secondary  service area includes the surrounding  areas of Atkinson,  Bacon, Ben
Hill,  Berrien,  Irwin,  Jeff  Davis  and Ware  Counties.  Access to the area is
provided  by U.S.  Highways  441 and 221 and  State  Highways  135 and 158,  all
intersecting  in Douglas.  Douglas  also has access to four  interstate  highway
systems,  I-10, I-16, I-75, and I-95, all within 100 miles of the city. The area
is  comprised  of  a  diversified   mix  of  commercial,   retail,   industrial,
agricultural and residential areas.

     Population  in  Coffee  County  was  approximately  29,592  in 1990 and was
estimated  at 34,298 in 1998,  an  increase  of almost 16% in eight  years.  The
population is projected to be 35,880 by 2001. The population is well distributed
by age and is slightly more than 51% female. The median age of the population is
32.2 years.

Services

Loan Portfolio.  As a full service commercial bank, the Bank offers a wide range
of commercial loans,  consumer loans and real estate loans consisting  primarily
of short and intermediate-term  residential lot loans,  residential construction
loans,   commercial   construction  loans,   agricultural  loans  and  permanent
residential and commercial real estate loans.  Commercial loans consist of loans
made to  individual,  corporate  and  partnership  borrowers  for a  variety  of
business  purposes and includes Small Business  Administration  loans.  Consumer
loans consist primarily of installment loans to individuals for personal, family
and household purposes,  including loans for automobiles,  home improvements and
investments.


                                      -3-
<PAGE>


     A  majority  of the  Bank's  construction  loans  consists  of  residential
construction loans. These loans typically involve a higher degree of risk to the
Bank than many other types of loans due to the borrower's greater sensitivity to
the effect  that  changes in  economic  conditions  may have on the success of a
project.  The Bank  intends  to  compensate  for the  increased  risk in part by
charging higher  interest rates and fees on these types of loans.  The Bank also
offers residential first mortgage loan products with fifteen year maximum terms.
Long-term   fixed  rate  mortgage  loans  are  originated  by  the  Bank  for  a
correspondent  Bank  and  are  not  held  in  the  Bank's  loan  portfolio.  All
construction,  acquisition and  development  loans will be limited to 80% of the
appraised  value of the  property  upon  completion  and will be  secured by the
related real estate and construction property.

     The Bank intends to originate variable rate loans and short term fixed rate
consumer  loans of five  years or less.  See "Asset  and  Liability  Management"
below.

Deposits.  The Bank  offers a wide  range of  commercial  and  consumer  deposit
services  that are typically  available in most banks and savings  institutions,
including  interest bearing and  noninterest-bearing  checking  accounts,  money
market checking  accounts,  negotiable order of withdrawal  ("NOW") accounts and
savings and other time deposits of various types ranging from daily money market
accounts  to  longer-term  certificates  of  deposit.  In  addition,  retirement
accounts such as Individual  Retirement  Accounts are available.  All depositors
are  insured by the  Federal  Deposit  Insurance  Corporation  up to the maximum
amount  permitted  by  law.  The  Bank's  depositors   consist  of  individuals,
businesses and their employees  within the Bank's market area,  obtained through
personal  solicitation  by  the  Bank's  officers  and  directors,  direct  mail
solicitation  and  advertisement  in the local media.  The Bank pays competitive
interest  rates  on time and  savings  deposits  and has a  service  charge  fee
schedule  competitive  with other  financial  institutions  in the Bank's market
area,  covering such matters as maintenance fees on checking accounts,  per item
processing fees on checking  accounts,  returned check charges and other similar
fees.

Other  Services.  The Bank provides  other services such as official bank checks
and  money  orders,  MasterCard  and Visa  credit  cards,  safe  deposit  boxes,
travelers'  checks,  bank by mail, direct deposit of payroll and social security
checks,  U.S. Savings Bonds,  wire transfer of funds, a night depository and ATM
access.  The Bank also  provides an array of  personalized  banking  services to
middle-  to  upper-income  individuals,   with  emphasis  on  knowledge  of  the
individual  financial  needs  and  objectives  of  these  customers  and  timely
response. The Bank seeks to promote long-term  relationships with these types of
customers.

Correspondent Banking

     Correspondent  banking  involves  the  provision of services by one bank to
another  bank which  cannot  provide that service for itself from an economic or
practical  standpoint.  The Bank has correspondent  banking  relationships  with
larger  commercial banks for investments,  liquidity,  federal funds lines, loan
participation,  check clearing services and consulting  services.  These include
Bankers  Bank  (Atlanta,  Georgia),  Regions  Bank  (Gainesville,  Georgia)  and
SunTrust Bank (Atlanta,  Georgia), Federal Reserve Bank (Atlanta,  Georgia), and
Federal Home Loan Bank (Atlanta, Georgia).

     The Bank  sells loan  participation  to one or more  correspondent  or area
banks with respect to loans that exceed the Bank's lending limit.

                                      -4-
<PAGE>



Asset and Liability Management

     The  primary  assets  of the  Bank  consists  of its  loan  and  investment
portfolios.  The Bank's loan portfolio consists primarily of variable rate loans
or fixed rate loans that  mature in less than five  years.  The  majority of the
Bank's  securities  investments  consist of  obligations  of the United  States,
obligations  guaranteed as to principal and interest by the United States, other
taxable  securities and certain  obligations of states and  municipalities.  The
Bank engages in federal  funds  transactions  with its  principal  correspondent
banks and currently  acts  primarily as a net seller of such funds.  The sale of
federal  funds  amounts  to a  short-term  loan from the Bank to  another  bank.
Ultimately,  the  Bank  will  strive  to  maintain  a loan  portfolio  equal  to
approximately  75% of assets and an investment  portfolio equal to approximately
16% of the assets,  with the  remaining 9% of the Bank's  assets  consisting  of
cash, fixed assets and other assets.

     Deposit  accounts,   including  transaction  accounts,  time  deposits  and
certificates of deposit,  represent the majority of the liabilities of the Bank.
The Bank  does not seek  brokered  certificates  of  deposit  or other  types of
brokered deposits.

     Efforts are made  generally to match  maturities  and rates of the loan and
investment  portfolios  with those  deposits,  although  exact  matching  is not
possible.  Substantially  all of the loans with maturities in excess of one year
are  negotiated  on a variable  interest  rate basis or with a demand  repayment
provision.  By pricing  loans on a variable  rate  structure  or by keeping  the
maturities of the loan and investment portfolios relatively short term, the Bank
is able to negotiate loan rates or to reinvest securities proceeds at prevailing
market rates,  thereby helping maintain a generally  consistent  spread over the
interest  rates paid by the Bank on the deposits which are used to fund the loan
and investment portfolios.

     The Bank has established policies and procedures designed to ensure that an
acceptable  asset/liability  mix is monitored on a timely  basis,  with a report
reflecting the  interest-sensitive  liabilities  being prepared and presented to
the Bank's Asset/Liability Committee on a quarterly basis. The objective of this
policy is to control interest-sensitive assets and liabilities so as to minimize
the impact of substantial movements in interest rates on the Bank's earnings.

     The Bank has developed an internal  lending policy for the Bank,  including
appropriate lending limits for each officer of the Bank based upon such criteria
as  the  experience  of  the  individual  officer.  Management  has  appropriate
procedures pertaining to lending and has established a lending limit above which
the approval of the Board of Directors  is required.  Additionally,  the Bank is
subject to certain statutory  requirements which generally provide that the Bank
may grant loans and  extensions of credit that are not fully secured to a single
borrower up to $1,011,000  (15% of the Bank's  unimpaired  capital and surplus).
The Bank also may grant  additional  loans and  extensions of credit to a single
borrower  up to $674,000  (10% of the bank's  unimpaired  capital and  surplus),
provided  such  additional  loans and  extensions of credit are fully secured by
readily marketable collateral.

     The Bank does not, as a matter of course,  finance purchases of raw land or
speculative commercial or industrial  developments.  The Bank generally does not
make loans outside of Coffee County and the surrounding seven county market area
and seeks to obtain a broad  diversification  of loan  customers.  The Bank will
request correspondent banks to participate in loans when loan amounts exceed the
Bank's legal limits or internal lending policies.  See  "Correspondent  Banking"
above.

                                      -5-
<PAGE>


Competition

     Banks  generally  compete  with other  financial  institutions  through the
banking  products and services  offered,  the pricing of services,  the level of
service provided, the convenience and availability of services and the degree of
expertise  and the personal  manner in which  services  are  offered.  In Coffee
County,  other than the Bank,  there are branches of six regional  banks.  These
include SunTrust Bank,  SouthTrust Bank, First Liberty Bank,  Citizens  Security
Bank,  Southeastern  Bank  and  Colony  Bank  Southeast.   The  Bank  encounters
competition from most of these financial institutions. In the conduct of certain
areas of its  banking  business,  the Bank also  competes  with  credit  unions,
consumer finance companies,  insurance companies,  money market mutual funds and
other financial  institutions,  some of which are not subject to the same degree
of regulation and restrictions imposed upon the Bank.

     Many of the Bank's  competitors have  substantially  greater  resources and
lending  limits  than the Bank has and  offer  certain  services,  such as trust
services,  that the Bank  currently  does not provide.  Moreover,  many of these
competitors  have  numerous  branch  offices and other  facilities in the PSA, a
competitive  advantage that the Bank initially does not have.  Nevertheless,  in
evaluating the competition in the PSA, the management and the Board of Directors
believe that there will be sufficient  growth in banking  activities  for all of
these  institutions,  including the Bank, to be successful,  based in part on an
average annual growth of  approximately  5.1% in commercial bank deposits in the
PSA over the last four years. Furthermore, management and the Board of Directors
believe that the  extensive  banking  experience  and contacts in the PSA of its
President  and  the  other  board  members  will  enable  the  Bank  to  compete
effectively  without  offering  unusually  high  interest  rates for deposits or
unusually low interest rates for loans. The Bank's relatively small size permits
it to offer more personalized service than its competitors, which is expected to
provide the Bank with a competitive advantage.
Employees

     At December 31, 1999, the Bank employed 35 full-time employees. The Company
has no employees.  Holding  company  duties are performed by bank  employees and
where such duties are  significant,  related  compensation and benefit costs are
allocated to and  reimbursed  by the holding  company.  The Bank  considers  its
relationship  with its  employees to be good. To the extent  possible,  the Bank
employs  persons  experienced  in the  banking  profession  and  persons who are
natives or long time residents of the Coffee County area.

Supervision and Regulation

     Both the Company and the Bank are  subject to  extensive  state and Federal
banking  regulations  that  impose  restrictions  on  and  provide  for  general
regulatory  oversight of our  operations.  These laws are generally  intended to
protect depositors and not shareholders.  The following discussion describes the
material elements of the regulatory framework that applies to us.

                                      -6-
<PAGE>


     To the  extent  that the  following  information  describes  statutory  and
regulatory  provisions,  it is  qualified  in its  entirety by  reference to the
particular statutory and regulatory provisions.  Any change in applicable law or
regulation  may have a material  effect on the  business  and  prospects  of the
Company and the Bank.

The Company

     As a bank  holding  company,  the Company is subject to  regulation  by the
Board of  Governors  of the  Federal  Reserve  System  (the  "Federal  Reserve")
pursuant to the federal Bank Holding Company Act (the "BHCA") and by the Georgia
Department  of Banking and Finance (the  "Georgia  Department")  pursuant to the
Georgia Bank Holding Company Act (the "GBHCA").

     The Company is required to file with the Federal  Reserve an annual  report
and such additional  information as the Federal Reserve may require  pursuant to
the BHCA. The Federal Reserve also may make  examinations of the Company and the
Bank.

     The Federal  Reserve has  established a risk-based and leverage  measure of
capital  adequacy for bank holding  companies that is similar to that adopted by
the OCC for banks.

     The risk-based  capital  standards are designed to make regulatory  capital
requirements more sensitive to differences in risk profiles among banks and bank
holding companies,  to account for off-balance-sheet  exposure,  and to minimize
disincentives  for holding liquid assets.  Assets and  off-balance-sheet  items,
such as letters of credit and unfunded loan  commitments,  are assigned to broad
risk  categories,  each with  appropriate  risk weights.  The resulting  capital
ratios  represent  capital as a  percentage  of total  risk-weighted  assets and
off-balance-sheet items.

     The  minimum  guideline  for the ratio of total  capital  to  risk-weighted
assets is 8%. Total capital consists of two components,  Tier 1 Capital and Tier
2 Capital.  Tier 1 Capital generally  consists of common  shareholders'  equity,
minority  interests  in  the  equity  accounts  of  consolidated   subsidiaries,
qualifying  noncumulative  perpetual  preferred  stock,  and a limited amount of
qualifying  cumulative  perpetual  preferred  stock,  less  goodwill  and  other
specified  intangible  assets.  Tier  1  Capital  must  equal  at  least  4%  of
risk-weighted  assets.  Tier 2 Capital generally  consists of subordinated debt,
other  preferred  stock and  hybrid  capital  and a limited  amount of loan loss
reserves.  The  total  amount  of Tier 2 Capital  is  limited  to 100% of Tier 1
Capital.

     In addition,  the Federal  Reserve has established  minimum  leverage ratio
guidelines for bank holding  companies.  These guidelines  provide for a minimum
ratio of Tier 1 Capital to average  assets,  less  goodwill and other  specified
intangible  assets, of 3% for bank holding companies that meet certain specified
criteria,  including having the highest  regulatory  rating and implementing the
Federal  Reserve's  risk-based  capital  measure for market risk. All other bank
holding  companies  generally  are  required to maintain a leverage  ratio of at
least 4%. The guidelines also provide that bank holding  companies  experiencing
internal  growth or making  acquisitions  will be expected  to  maintain  strong
capital positions  substantially  above the minimum  supervisory  levels without
significant  reliance on intangible  assets.  The Federal Reserve  considers the
leverage ratio and other indicators of capital strength in evaluating  proposals
for expansion or new activities.


                                      -7-
<PAGE>



     If the  capital of a bank  holding  company  falls below  minimum  required
levels,  the bank holding company may be denied approval to acquire or establish
additional  banks or non-bank  businesses,  as  discussed  below.  Bank  holding
companies may be compelled by bank regulatory  authorities to invest  additional
capital in the event a  subsidiary  bank  experiences  either  significant  loan
losses or rapid  growth of loans or deposits.  In  addition,  the company may be
required to provide  additional capital to any additional banks it acquires as a
condition to obtaining the approvals and consents of regulatory  authorities  in
connection with such acquisitions.

     Bank holding companies are required by the BHCA to obtain approval from the
Federal Reserve prior to acquiring, directly or indirectly, ownership or control
of more than 5% of the  outstanding  shares of any class of voting  stock of any
bank or bank holding company. Bank holding companies and their subsidiaries also
are  prohibited  from  acquiring any voting shares of, or interest in, any banks
located  outside  of the  state  in which  the  operations  of the bank  holding
company's   subsidiaries  are  located  unless  the  acquisition  is  authorized
specifically  by the  statutes  of the  state in which the  target  is  located.
Several  southeastern  states,   including  Georgia,   have  enacted  reciprocal
legislation that authorizes interstate  acquisitions of banking organizations by
bank holding companies within the southeastern United States, subject to certain
conditions and restrictions.  As a result of this  legislation,  the company may
become a candidate for  acquisition  by, or may itself seek to acquire,  banking
organizations located in those states that have enacted reciprocal  legislation.
(See,  however,  certain  restrictions  on  acquisitions  imposed  by the  GBHCA
discussed  below).  Additionally,  under the BHCA, as amended pursuant to FIRREA
and as implemented by an amendment to the Federal  Reserve  regulations,  a bank
holding company may acquire a savings association,  as defined in FIRREA, in any
state without  regard to whether the bank holding  company can operate a bank in
that state.

     The BHCA also prohibits bank holding  companies,  with certain  exceptions,
from  acquiring  more than 5% of the voting  shares of any company that is not a
bank and from  engaging  in any  business  other  than  banking or  managing  or
controlling  banks or other  permissible  subsidiaries.  The Federal  Reserve is
authorized  to approve,  among other  things,  the ownership of shares by a bank
holding  company in any company the activities of which the Federal  Reserve has
determined  to be so closely  related to banking or to managing  or  controlling
banks as to be a proper  incident  thereto.  Notice to and review by the Federal
Reserve of such activities would be necessary before the Company could engage in
such  activities.  The Federal  Reserve is  empowered to  differentiate  between
activities  that are initiated de novo by a bank holding company or a subsidiary
and activities commenced by acquisition of a going concern.

     The Federal Reserve has enforcement  powers over bank holding companies and
nonbanking subsidiaries to forestall activities that represent unsafe or unsound
practices or constitute violations of law. These powers may be exercised through
the issuance of  cease-and-desist  orders or other actions.  The Federal Reserve
also  is  empowered  to  assess  civil  money  penalties  against  companies  or
individuals who violate the BHCA or orders or regulations  thereunder,  to order
termination  of  non-banking  activities  of  non-banking  subsidiaries  of bank
holding  companies  and to order  termination  of  ownership  and  control  of a
non-banking  subsidiary by a bank holding company.  Certain  violations may also
result in criminal penalties.

     The status of the Company as a registered  bank holding  company  under the
BHCA does not exempt it from  certain  federal  and state  laws and  regulations
applicable to corporations  generally,  including,  without limitation,  certain
provisions of the federal securities laws.


                                      -8-
<PAGE>


     The Bank and the Company is "affiliated"  within the meaning of the Federal
Reserve Act. Certain  provisions of the Federal Reserve Act establish  standards
for the terms of, limit the amount of and establish collateral requirements with
respect to any loans or extensions of credit to, and investments in,  affiliates
by the Bank as well as set arms-length  criteria for such  transactions  and for
certain other transactions (including payment by the Bank for services and under
any  contract)  between  the  Bank  and its  affiliates.  In  addition,  related
provisions of the Federal Reserve Act and the Federal Reserve  regulations limit
the amounts of, and establish  required  procedures  and credit  standards  with
respect to,  loans and other  extensions  of credit to officers,  directors  and
principal  shareholders  of the Bank,  the  Company  and any  subsidiary  of the
Company, and to related interests of such persons.

     Under Section 106(b) of the Bank Holding Company Act Amendments of 1970 (12
U.S.C. S 1972), the Bank is prohibited from extending credit, selling or leasing
property  or  furnishing  any  service  to  any  customer  on the  condition  or
requirement  that the customer (i) obtain any  additional  property,  service or
credit from the Company,  the Bank or any other subsidiary of the Company,  (ii)
refrain from  obtaining any property,  credit or service from any  competitor of
the  Company,  the Bank or any  subsidiary  of the Company or (iii)  furnish any
credit,  property or service to the Company,  the Bank or any  subsidiary of the
Company.

     As a bank  holding  company,  the  Company is  required to give the Federal
Reserve  prior written  notice of any purchase or redemption of its  outstanding
equity  securities if the gross  consideration  for the purchase or  redemption,
when  combined  with  the net  consideration  paid  for all  such  purchases  or
redemptions  during  the  preceding  12  months,  is equal to 10% or more of the
Company's  consolidated  net worth.  The Federal  Reserve may disapprove  such a
purchase or redemption if it determines that the proposal  constitutes an unsafe
or unsound practice, would violate any law, regulation, Federal Reserve order or
directive or any condition  imposed by, or written  agreement  with, the Federal
Reserve.

     In November 1985, the Federal Reserve adopted its Policy  Statement on Cash
Dividends Not Fully Covered by Earnings. The Policy Statement sets forth various
guidelines that the Federal Reserve  believes that a bank holding company should
follow in  establishing  its dividend  policy.  In general,  the Federal Reserve
stated  that bank  holding  companies  should  not pay  dividends  except out of
current  earnings and unless the prospective  rate of earnings  retention by the
holding  company appears  consistent  with its capital needs,  asset quality and
overall financial condition.

     On   November   12,   1999,   President   Clinton   signed   into  law  the
Gramm-Leach-Bliley   Act  (the  "GLB  Act"),  which  significantly  changed  the
regulatory  structure  and  oversight  of the Company and the Bank.  The GLB Act
revises the Bank Holding Company Act and repeals the  affiliation  provisions of
the Glass-Steagall Act of 1933, permitting a qualifying holding company,  called
a  "financial  holding  company",  to  engage  in  a  full  range  of  financial
activities,  including banking,  insurance and securities activities, as well as
merchant  banking and  additional  activities  that are "financial in nature" or
"incidental" to such financial  activities.  The GLB Act thus provides  expanded
financial  affiliation  opportunities  for existing  bank  holding  companies by
allowing  bank holding  companies  to engage in  activities  such as  securities
underwriting and the underwriting and brokering of insurance  products.  The GLB
Act also expands passive  investments by financial holding companies in any type
of company,  financial or  nonfinancial,  through merchant banking and insurance
company  investments.  In order  for a bank  holding  company  to  qualify  as a
financial  holding  company,  its  subsidiary  depository  institutions  must be
"well-capitalized"  and "well-managed" and have at least a "satisfactory" rating
under the Community Reinvestment Act.


                                      -9-
<PAGE>


     The GLB Act also reforms the regulatory framework of the financial services
industry.  Under the GLB Act, financial holding companies are subject to primary
supervision by the FRB, while current federal and state  regulators of financial
holding  company  regulated  subsidiaries  such  as  insurers,   broker-dealers,
investment   companies  and  banks  generally  retain  their   jurisdiction  and
authority.  In order to implement its underlying purposes,  the GLB Act preempts
state laws that restrict the establishment of financial affiliations  authorized
or  permitted  under the GLB Act,  subject  to  specified  exceptions  for state
insurance regulators. The GLB Act also removes the current blanket exemption for
banks from the  broker-dealer  registration  requirements  under the  Securities
Exchange Act of 1934, as amended,  amends the Investment Company Act of 1940, as
amended, with respect to bank common trust fund and mutual fund activities,  and
amends the Investment Advisers Act of 1940, as amended, to require  registration
of banks that act as investment advisers to mutual funds.

     The provisions of the GLB Act relating to financial  holding companies will
become  effective  120 days  after  its  enactment,  or about  March  15,  2000,
excluding the federal preemption provisions,  which became effective on the date
of  enactment.  In January  2000,  the FRB and the OCC each  issued  interim and
proposed  rules  governing  the  application  process  for  becoming a financial
holding  company  or  subsidiary  of a  financial  holding  company.  Additional
regulations  are expected  from the FRB and the OCC during the year 2000 for the
implementation of the GLB Act.

     The Georgia  Department has established a minimum level of capital to total
assets of 5%, with certain adjustments, on a consolidated basis for bank holding
companies.  The capital  guidelines  assume  adequate  liquidity  and a moderate
degree of risk in the loan and investment  portfolios as well as any off balance
sheet activities.  In assessing compliance with the guidelines,  therefore,  the
Georgia Department reviews the relationship of on and off balance sheet risks to
capital and requires those  institutions  with high or inordinate levels of risk
to adhere to higher capital  standards.  Bank holding companies whose operations
involve,  or are exposed to high or  inordinate  degrees of risk are expected to
hold additional capital to compensate for such risks. In addition,  bank holding
companies engaging in significant nonbanking activities typically require higher
capital ratios than do banks alone.

     The  BHCA,  as  amended  by  the  interstate   banking  provisions  of  the
Riegle-Neal  Interstate  Banking  and  Branching  Efficiency  Act of  1994  (the
"Interstate  Banking  Act",   repealed  the  prior  statutory   restrictions  on
interstate  acquisitions of banks by bank holding companies,  and a bank holding
company  located in Georgia may now acquire a bank  located in any other  state,
and any bank holding  company  located  outside  Georgia may lawfully  acquire a
Georgia-based  bank,  regardless  of state law to the  contrary,  in either case
subject   to  certain   deposit-percentage,   aging   requirements,   and  other
restrictions. The Interstate Banking Act also provides that, after June 1, 1997,
national and state chartered banks may branch interstate through acquisitions of
banks in other states.  By adopting  legislation prior to that date, a state has
the ability  either to "opt in" (which Georgia has done) and accelerate the date
after  which  interstate  branching  is  permissible  or "opt out" and  prohibit
interstate branching altogether.

                                      -10-
<PAGE>


The Bank

     As a national  banking  association,  the Bank is  subject to  supervision,
examination  and regulation by the OCC under the National Bank Act. It also is a
member of the Federal  Reserve  System and subject to  regulation by the Federal
Reserve  under the Federal  Reserve Act. The deposits of the Bank are insured by
the FDIC to the  full  extent  provided  by law and,  therefore,  the Bank  pays
insurance  assessments  to, and is subject to regulation and  examination by the
FDIC.

     The FDIC currently insures the deposits of each member bank to a maximum of
$100,000 per  depositor.  For this  protection,  the Bank will pay a semi-annual
statutory  assessment  and will be subject to the rules and  regulations  of the
FDIC.  The FDIC has the authority to prevent the  continuance  or development of
unsound and unsafe banking practices.  The FDIC is also authorized,  among other
things,  to approve  conversions,  mergers,  consolidations  and  assumption  of
deposit  liability  transactions  between  insured banks and uninsured  banks or
institutions,  and to prevent capital or surplus diminution in such transactions
where the resulting,  continuing,  or assumed bank is an insured nonmember state
bank. The FDIC premium rate is set by the Financial Institutions Reform Recovery
and  Enforcement  Act  ("FIRREA").  FIRREA  primarily  affects the regulation of
savings  associations  and savings and loan  holding  companies  rather than the
regulation of commercial banks and bank holding companies.  However, FIRREA does
contain certain provisions affecting banks and bank holding companies, including
without  limitation,  provisions  affecting deposit insurance  premiums,  thrift
acquisitions,   liability  of  commonly  controlled   depository   institutions,
receivership  and  conservatorship   rights  and  procedures  and  substantially
increased penalties for violation of banking statutes, regulations and orders.

     In 1991, the Federal Deposit Insurance Corporation  Improvement Act of 1991
(Act) was enacted.  The Act affects all federally  insured banks,  savings banks
and  thrifts.  The Act  contains  a $70  billion  recapitalization  of the  Bank
Insurance  Fund (BIF) by  significantly  increasing the amount that the FDIC can
borrow from the Treasury.  The FDIC must assess  premiums that are sufficient to
give the BIF  reserves  of $1.25 for each $100 of insured  deposits.  Additional
significant provisions of the Act include: requiring prompt corrective action by
regulators  if  minimum  capital  standards  are  not  met;  establishing  early
intervention  procedures for "significantly"  undercapitalized (to be defined by
the FDIC)  institutions;  limiting FDIC reimbursement of uninsured deposits when
large banks fail;  requiring  an annual  regulatory  examination;  and  imposing
auditing and accounting requirements, including management and auditor reporting
on internal  controls over financial  reporting and on compliance  with laws and
regulations.

     The Act requires FDIC-insured depository institutions with assets in excess
of $150 million to file an "annual report" with the federal regulatory  agencies
that will be available for public inspection.  This requirement can be satisfied
for  subsidiaries  of a bank  holding  company  by an audit of the  consolidated
financial statements of the holding company. In addition,  the Act requires that
the annual report must include an auditor's  report on  management's  assertions
regarding  the  effectiveness  of  internal  controls  pertaining  to  financial
reporting and on agreed upon procedures concerning compliance with specific laws
and regulations  designated by federal regulatory  agencies.  The management and
auditor  reporting  requirements  may be satisfied at the holding company level,
depending  upon  various  criteria  for asset  levels  and CAMEL  ratings of the
individual subsidiaries.  However, all FDIC-insured depository institutions over
$9 billion will require the additional management and auditor reports.


                                      -11-
<PAGE>


     Federal and Georgia laws  regulate  many aspects of the Bank's  operations,
including  branch  offices,  remote  facilities,   lending  limits,   borrowing,
permitted  investments,  declaration  of  dividends,  mergers and  acquisitions,
electronic  funds transfers,  deposits  reserve  requirements and interest rates
payable on deposits and  chargeable on loans.  The Bank is subject to applicable
Georgia laws that do not conflict with, or are not preempted by, federal banking
laws, including Georgia laws limiting the maximum allowable rates of interest on
loans and extensions of credit to customers of the Bank.

     Similar to the Federal  Reserve's  capital  requirements  applicable to the
Company,  the OCC has issued risk-based capital rules requiring (i) at least 50%
of a national bank's total capital to consist of common and certain other equity
capital;  (ii) assets and off balance  sheet items to be weighted  according  to
risk;  (iii) Tier 1 capital to equal or exceed 4% of total  assets (see  below);
and (iv) the total capital to risk-weighted assets ratio to be 8%.

     Under the  National  Bank Act, if the capital  stock of a national  bank is
impaired by losses or otherwise, the OCC is authorized to require payment of the
deficiency by assessment upon the bank's shareholders.  To the extent necessary,
if any such assessment is not paid by any shareholder  after notice,  the OCC is
authorized  to sell the stock of such  shareholder  to satisfy  the  deficiency.
National banks also are subject to legal  limitations on the amount of dividends
they can pay.  The prior  approval  of the OCC is  required  if the total of all
dividends  declared  by a national  bank in any  calendar  year will exceed such
bank's net  profits  (as defined by  statute)  for that year  combined  with its
retained net profits for the preceding two years, less any required transfers to
surplus or to a fund for the retirement of any preferred stock. Other rules that
are  administered by the OCC and that are applicable to national banks relate to
issuance of  securities,  establishment  of branches,  limitations  on credit to
subsidiaries   and  other  aspects  of  the  business  and  activities  of  such
subsidiaries.  The OCC has broad  authority  to  prohibit  national  banks  from
engaging  in unsafe or  unsound  banking  practices  and  periodically  examines
national  banks  to  determine   their   compliance   with  applicable  law  and
regulations.  National banks also must make periodic  reports of their condition
to the OCC.

     Certain  federal   legislation,   including  the  Depository   Institutions
Deregulation  and  Monetary  Control  Act  of  1980  and  the  Garn-St.  Germain
Depository  Institutions  Act  of  1982,  has  had  a  significant  impact  upon
competition  among  financial  institutions.  In  particular,  banking  laws and
regulations  enacted  since 1980 have  increased  substantially  the  ability of
savings institutions to compete with commercial banks for deposits.

Prompt Corrective Action

     The  Federal  Deposit  Insurance   Corporation   Improvement  Act  of  1991
("FDICIA")  establishes  a system of prompt  corrective  action to  resolve  the
problems  of  undercapitalized  institutions.  Under this  system,  the  federal
banking regulators have established five capital  categories;  well capitalized,
adequately capitalized,  undercapitalized,  significantly undercapitalized,  and
critically  undercapitalized.  The federal banking  regulators have specified by
regulation the relevant capital level for each category.


                                      -12-
<PAGE>


     Under the prompt corrective action provisions an institution that (i) has a
Total Risk-Based  Capital Ratio of 10% or greater,  a Tier 1 Risk-Based  Capital
Ratio of 6% or  greater,  and a Leverage  Ratio of 5% or greater and (ii) is not
subject to any written agreement, order, capital directive, or prompt corrective
action directive issued by the appropriate  federal banking  regulator is deemed
to be well capitalized.  An institution with a Total Risk-Based Capital Ratio of
8% or greater, a Tier 1 Risk-Based Capital Ratio of 4% or greater, an a Leverage
Ratio of 4% or greater is considered to be adequately capitalized.  A depository
institution that has a Total Risk-Based  Capital Ratio of less than 8%, a Tier 1
Risk-Based Capital Ratio of less than 4%, or a Leverage Ratio of less than 4% is
considered to be  undercapitalized.  A depository  institution  that has a Total
Risk-Based  Capital Ratio of less than 6%, a Tier 1 Risk-Based  Capital Ratio of
less  than  3%,  or a  Leverage  Ratio  of less  than 3%,  is  considered  to be
significantly  undercapitalized,  and an institution  that has a tangible equity
capital  to assets  ratio  equal to or less  than 2% is deemed to be  critically
undercapitalized.  For purposes of the  regulation,  the term "tangible  equity"
includes  core  capital  elements  counted as Tier 1 Capital for purposes of the
risk-based  capital  standards,   plus  the  amount  of  outstanding  cumulative
perpetual  preferred stock  (including  related  surplus),  minus all intangible
assets with certain exceptions.  A depository institution may be deemed to be in
a  capitalized  category  that is lower than is indicated by its actual  capital
position if it receives an unsatisfactory examination rating.

     An  institution  that is  categorized  as  undercapitalized,  significantly
undercapitalized,  or  critically  undercapitalized  is  required  to  submit an
acceptable  capital   restoration  plan  to  its  appropriate   federal  banking
regulator. Under FDICIA, a bank holding company must guarantee that a subsidiary
depository  institution meets its capital  restoration plan,  subject to certain
limitations.  The  obligation of a controlling  holding  company under FDICIA to
fund  a  capital  restoration  plan  is  limited  to  the  lesser  of  5%  of an
undercapitalized  subsidiary's  assets or the amount required to meet regulatory
capital  requirements.   An  undercapitalized   institution  is  also  generally
prohibited  from  increasing  its average  total  assets,  making  acquisitions,
establishing  any branches,  or engaging in any new line of business,  except in
accordance with an accepted capital restoration plan or with the approval of the
FDIC. In addition,  the appropriate federal banking regulator is given authority
with respect to any undercapitalized  depository  institution to take any of the
actions  it  is  required  to  or  may  take  with  respect  to a  significantly
undercapitalized  institution  as described  below if it determines  "that those
actions are necessary to carry out the purpose" of FDICIA.

     For  those   institutions  that  are  significantly   undercapitalized   or
undercapitalized  and either fail to submit an  acceptable  capital  restoration
plan or fail to implement an approved capital  restoration plan, the appropriate
federal  banking  regulator must require the  institution to take one or more of
the following  actions:  (i) sell enough shares,  including  voting  shares,  to
become  adequately  capitalized;  (ii)  merge  with  (or  be  sold  to)  another
institution  (or holding  company),  but only if grounds exist for  appointing a
conservator  or  receiver;  (iii)  restrict  certain  transactions  with banking
affiliates as if the "sister bank" exception to the  requirements of Section 23A
of the Federal Reserve Act did not exist; (iv) otherwise  restrict  transactions
with  bank  or  non-bank  affiliates;  (v)  restrict  interest  rates  that  the
institution  pays  on  deposits  to  "prevailing  rates"  in  the  institution's
"region;"  (vi)  restrict  asset  growth or reduce  total  assets;  (vii) alter,
reduce, or terminate activities;  (viii) hold a new election of directors;  (ix)
dismiss any director or senior  executive  officer who held office for more than
180 days immediately  before the institution became  undercapitalized,  provided
that in requiring dismissal of a director or senior officer,  the regulator must
comply with certain  procedural  requirements,  including the opportunity for an
appeal in which the  director or officer  will have the burden of proving his or
her value to the institution;  (x) employ "qualified" senior executive officers;
(ix) cease accepting deposits from correspondent depository institutions;  (xii)
divest certain nondepository  affiliates which pose a danger to the institution;
or (xiii) be divested by a parent  holding  company.  In  addition,  without the
prior approval of the  appropriate  federal banking  regulator,  a significantly
undercapitalized  institution  may not pay any  bonus  to any  senior  executive
officer or increase the rate of compensation for such officer.

                                      -13-
<PAGE>


     At December 31, 1999, the Bank had the requisite  capital levels to qualify
as well capitalized.

FDIC Insurance Assessments

     The FDIC has adopted a risk-based  assessment system for insured depository
institutions  that  takes  into  account  the risks  attributable  to  different
categories and  concentrations of assets and liabilities.  The system assigns an
institution  to one of three  capital  categories:  (i) well  capitalized;  (ii)
adequately capitalized;  and (iii) undercapitalized.  These three categories are
substantially  similar  to the prompt  corrective  action  categories  described
above,  with the  "undercapitalized"  category  including  institutions that are
undercapitalized,     significantly     undercapitalized,     and     critically
undercapitalized  for prompt corrective action purposes.  An institution is also
assigned  by  the  FDIC  to  one  of  three  supervisory  subgroups  based  on a
supervisory evaluation that the institution's primary federal regulator provides
to the FDIC and  information  that the FDIC  determines  to be  relevant  to the
institution's  financial  condition  and the risk  posed to the  deposit  funds.
Assessments  range  from 0 to 27 cents per $100 of  deposits,  depending  on the
institution's  capital group and  supervisory  subgroup.  In addition,  the FDIC
imposes assessments to help pay off the $780 million in annual interest payments
on the $8 billion financing  corporation bonds issued in the late 1980's as part
of the  government  rescue  of the  thrift  industry.  This  assessment  rate is
adjusted quarterly and ranged from 1.16 cents to 1.22 cents per $100 of deposits
in 1999.

     Under the FDIA,  insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices,  is in
an unsafe or unsound  condition  to continue  operations,  or has  violated  any
applicable law, regulation, rule, order, or condition imposed by the FDIC.

Safety and Soundness Standards

     The FDIA,  as amended by FDICIA and the Riegle  Community  Development  and
Regulatory  Improvement  Act of  1994,  requires  the  federal  bank  regulatory
agencies to prescribe  standards,  by  regulations  or  guidelines,  relating to
internal  controls,   information  systems  and  internal  audit  systems,  loan
documentation,  credit underwriting,  interest rate risk exposure, asset growth,
asset quality,  earnings,  stock valuation and compensation,  fees and benefits,
and such  other  operational  and  managerial  standards  as the  agencies  deem
appropriate.  The  federal  bank  regulatory  agencies  have  adopted  a set  of
guidelines  prescribing  safety and soundness  standards  pursuant to FDICIA, as
amended.  The  guidelines  establish  general  standards  relating  to  internal
controls and information  systems,  internal audit systems,  loan documentation,
credit  underwriting,  interest rate  exposure,  asset growth and  compensation,
fees,  and benefits.  In general,  the guidelines  require,  among other things,
appropriate systems and practices to identify and manage the risks and exposures
specified in the guidelines.  The guidelines prohibit excessive  compensation as
an unsafe and unsound  practice and describe  compensation as excessive when the
amounts paid are unreasonable or  disproportionate  to the services performed by
an executive officer, employee, director, or principal shareholders. The federal
banking agencies determined that stock valuation standards were not appropriate.
In  addition,  the  agencies  adopted  regulations  that  authorize,  but do not
require,  an agency to order an  institution  that has been  given  notice by an
agency that it is not satisfying  any of such safety and soundness  standards to
submit a compliance plan. If, after being so notified,  an institution  fails to
submit  an  acceptable  compliance  plan or fails  in any  material  respect  to
implement an accepted  compliance plan, the agency must issue an order directing
action to correct the deficiency and may issue an order  directing other actions
of the  types to which an  undercapitalized  association  is  subject  under the
"prompt  corrective  action"  provisions of FDICIA.  If an institution  fails to
comply with such an order, the agency may seek to enforce such order in judicial
proceedings  and to impose civil money  penalties.  The federal bank  regulatory
agencies also proposed guidelines for asset quality and earnings standards.

                                      -14-
<PAGE>


     Federal banking  regulations  applicable to all banks,  among other things,
(i) provide federal bank  regulatory  agencies with powers to prevent unsafe and
unsound  banking  practices;  (ii)  restrict  preferential  loans  by  banks  to
"insiders"  of  banks;  (iii)  require  banks  to keep  information  on loans to
principal  shareholders  and  executive  officers;  and  (iv)  prohibit  certain
director and officer interlocks between financial institutions.

Community Reinvestment Act

     The Community  Reinvestment Act requires the appropriate federal regulator,
in connection  with their  examinations of financial  institutions  within their
jurisdiction,  to evaluate the record of each  financial  institution in meeting
the  credit  needs of its local  community,  including  low and  moderate-income
neighborhoods.   These  factors  are  also  considered  in  evaluating  mergers,
acquisitions,  and  applications  to  open a  branch  or  facility.  Failure  to
adequately  meet  these  criteria  could  impose  additional   requirements  and
limitations on the Bank. Under the Gramm-Leach-Bliley  Act, banks with aggregate
assets of not more than $250 million are subject to a Community Reinvestment Act
examination  only  once  every 60  months if the bank  receives  an  outstanding
rating,  once every 48 months if it receives a satisfactory rating and as needed
if  the   rating   is  less   than   satisfactory.   Additionally,   under   the
Gramm-Leach-Bliley  Act,  banks are  required to publicly  disclose the terms of
various Community Reinvestment Act-related agreements.

Monetary Policy

     Banking is a business  that  depends on  interest  rate  differentials.  In
general,  the  difference  between  the  interest  rates paid by the Bank on its
deposits and other  borrowings and the interest rates received on loans extended
to its customers and on securities  held in its  portfolios  comprises the major
portion of the Bank's earnings.

     The  earnings  and growth of the Bank and of the Company are  affected  not
only by general economic conditions,  both domestic and foreign, but also by the
monetary and fiscal policies of the United States and its agencies, particularly
the Board. The Board implements  national  monetary policy (as opposed to fiscal
policy),  such as seeking to curb  inflation and combat  recession,  by its open
market operations in the United States government securities, adjustments in the
amount of industry  reserves  that banks and other  financial  institutions  are
required to  maintain  and  adjustments  to the  discount  rates  applicable  to
borrowings by banks from the Federal Reserve System. The actions of the Board in
these areas  influence  the growth of bank loans,  investments  and deposits and
also affect  interest rates charged and paid on deposits.  The nature and impact
of any future changes in monetary policies cannot be predicted with certainty.

Other Regulatory Matters

     The  Board,  in 1985,  issued a policy  statement  on the  payment  of cash
dividends by bank holding companies.  In the statement,  the Board expressed its
view that a bank holding company  experiencing  earnings weakness should not pay
cash dividends  exceeding its net income or that can be funded only in ways that
weaken the holding company's financial health, such as by borrowing.


                                      -15-
<PAGE>



     Interest  and other  charges  collected or  contracted  for by the Bank are
subject to state usury laws and federal  laws  concerning  interest  rates.  The
Bank's loan  operations  are also subject to federal laws  applicable  to credit
transactions, such as:

- The federal  Truth-In-Lending  Act,  governing  disclosures of credit terms to
consumer borrowers;

- The Home Mortgage Disclosure Act of 1975, requiring financial  institutions to
provide  information  to enable the public and  public  officials  to  determine
whether a financial  institution  is fulfilling  its obligation to help meet the
housing needs of the community it serves;

- The Equal Credit Opportunity Act,  prohibiting  discrimination on the basis of
race, creed or other prohibited factors in extending credit;

- The Fair Credit  Reporting  Act of 1978,  governing  the use and  provision of
information to credit reporting agencies;

- The Fair Debt Collection Act, governing the manner in which consumer debts may
be collected by collection agencies; and

- The rules and  regulations of the various  federal  agencies  charged with the
responsibility of implementing these federal laws.

     The deposit operations of the Bank are subject to:

- The  Right  to  Financial  Privacy  Act,  which  imposes  a duty  to  maintain
confidentiality  of consumer  financial  records and  prescribes  procedures for
complying with administrative subpoenas of financial records; and

- The  Electronic  Funds  Transfer  Act and  Regulation  E issued by the Federal
Reserve  to  implement  that  act,  which  governs  automatic  deposits  to  and
withdrawals from deposit accounts and customers' rights and liabilities  arising
from the use of automated teller machines and other electronic banking services.

Taxation

General.  In  general,  the  Company and the Bank is taxed in the same manner as
other  corporations  under the Internal  Revenue  Code of 1986,  as amended (the
"Code"),  although the Code contains certain rules which may affect the taxation
of banks to a greater degree than other corporations. The general rate structure
and certain of these special rules are discussed below.

Rates.  Corporation  income is subject to  graduated  federal  income tax rates,
beginning  at 15% of the  corporation's  first  $50,000 of taxable  income,  and
increasing to a maximum rate of 34% with respect to taxable  income in excess of
$75,000.  However,  taxable  income that falls between  $100,000 and $335,000 is
subject to an additional 5% surcharge, up to a maximum surcharge of $11,750.

                                      -16-
<PAGE>


Bad Debt  Reserves.  The use of the  reserve  method of  computing  the bad debt
deduction  is no  longer  available  to  any  bank  which,  either  alone  or in
combination with all members of its  parent-subsidiary  controlled group, has an
average  adjusted  basis in its  total  combined  assets  of in  excess  of $500
million.  Such a bank must use the specific  charge-off  method of deducting bad
debts.  Because the company has assets of less than $500 million, it is eligible
to  use  the  reserve  method,  but  is  limited  to the  experience  method  of
calculating  additions to its bad debt reserve.  The experience  method measures
the ratio of actual  bad debts to total  outstanding  loans  based on a six-year
moving average.

Interest Expense on Tax-Exempt Obligations.  In general, a bank is not permitted
to deduct that portion of its interest expense allocable to tax-exempt  interest
income.  The  allocation of a bank's  interest  expense to  tax-exempt  interest
income is based on the relative  proportion of the bank's total average adjusted
basis in its tax-exempt  obligations to its total average  adjusted basis in all
of its assets.  There is an  exception  to this  disallowance  rule for interest
expense  allocable  to  "qualified   tax-exempt   obligations,"  which  must  be
designated as such by the issuer and which are not private activity bonds.

Net Operating  Losses.  Net operating  losses of a bank generally may be carried
back three taxable years and carried  forward 15 taxable years.  An exception to
the general rule permits the portion of a net operating loss incurred after 1986
and before 1994 which is  attributable to bad debt losses to be carried back ten
years and forward at least five years.

Alternative  Minimum Tax. All corporations,  including banks, are subject to the
corporate alternative minimum tax. For corporations, the alternative minimum tax
rate is 20% of the  alternative  minimum  taxable  income  ("AMTI") in excess of
certain exemption amounts ($40,000,  phased out when AMTI exceeds $150,000). The
alternative  minimum  tax is  payable  to the  extent  it  exceeds  regular  tax
liability.  It is possible  for a taxpayer  such as the Company to be liable for
alternative minimum tax even if its regular tax liability is zero.

     In computing  AMTI, a taxpayer  must include  certain items not included in
the computation of regular taxable income.  Financial  institutions must include
in AMTI the difference  between the amount added to the bad debt reserve for the
year and the amount  which  would  have been  deducted  for bad debts  using the
actual experience method. For all corporations, AMTI includes certain tax-exempt
income  on  private  activity  bonds  and  75% of  the  difference  between  the
corporation's  "current  adjusted  earnings"  and its AMTI  (determined  without
regard to this item). A corporation's "current adjusted earnings" means its AMTI
(determined  without regard to this item), with certain  adjustments,  including
the addition of tax-exempt income.

Future Requirements

     Statutes  and   regulations   are   regularly   introduced   which  contain
wide-ranging  proposals for altering the structure,  regulations and competitive
relationships  of the nation's  financial  institutions.  It cannot be predicted
whether or in what form any proposed  statute or  regulation  will be adopted or
the extent to which the business of FNC Bancorp, Inc. or its Subsidiary Bank may
be affected by such statute or regulation.


                                      -17-
<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

     The Company's  principal executive offices are located at 420 South Madison
Avenue,  Douglas,  Georgia. This location is in the southern portion of downtown
Douglas,  which is believed to be the most rapidly  growing  section of Douglas.
This location was chosen because of its convenience to both the central downtown
area and the retail and professional  expansion on the south side of Douglas. In
addition, this site offers good visibility to the one-way south-bound traffic on
Peterson  Avenue and provides access to customers from Cherry Street and Madison
Avenue. The Board of Directors are dedicated to maintaining the viability of the
downtown  Douglas area and believe  that the Bank  building  adds an  attractive
building to the downtown area while avoiding traffic congestion.

     The Organizers formed a partnership, the CEF Partnership, which obtained an
option to purchase a 3.46 acre site at the above location at a purchase price of
$330,000,  which is  approximately  $20,000  below  the  appraised  value of the
property.  On December 28, 1990,  the CEF  Partnership  exercised  its option to
purchase  the  property  from the seller,  Douglas  Peanut and Grain Co.,  whose
president,  Ralph G. Evans,  is an  Organizer  of the Company and the Bank.  The
purchase price for the option was $31,800,  all of which was credited toward the
purchase price of the property.  The Bank used $330,000 of the proceeds from the
sale of its stock to the Company to reimburse the  Organizers for the payment of
the  purchase  price of the option and to complete the purchase of the site from
the CEF Partnership.

     During 1992, the Bank completed  construction of its headquarters  building
on the site purchased  from the  Partnership.  Construction  cost and furniture,
fixtures and equipment totaled approximately $1.3 million.

     At December 31,  1999,  the Company was in the process of  constructing  an
annex to the main office. Commercial lending and, potentially,  personal banking
and insurance  services will be located in the annex. The total cost to complete
construction,  landscape,  furnish and equip the new facility is estimated to be
approximately $635,000.

ITEM 3.  LEGAL PROCEEDINGS

     Neither the Company  nor its  subsidiary  bank is a party to, nor is any of
their  property the subject of, any material  pending legal  proceedings,  other
than the ordinarily routine proceedings  incidental to the business of the Bank,
nor to the knowledge of the  management of the Company are any such  proceedings
contemplated or threatened against it or its subsidiary.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

     No matters were  submitted to a vote of the Company's  shareholders  during
the fourth quarter of 1999.



                                      -18-
<PAGE>

PART II


ITEM 5.  MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
         SECURITY HOLDER MATTERS

        (a) There currently is no public market for the Common Stock.
        (b) As of March 1, 2000, there were  approximately  360 holders of
            record of the Common Stock.
        (c) The Company has never  declared or paid a cash  dividend but expects
            to do so in the future.  The payment of dividends by national banks
            is restricted by statute and  regulation.  See  "Item  1.
            Description  of  Business  -  Supervision  and Regulation."






                                      -19-
<PAGE>


ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

Cautionary Statement Regarding Forward-Looking Information

     The Company's  1999 Annual Report on Form 10-KSB  contains  forward-looking
statements  in addition to  historical  information.  The Company  cautions that
there are various  important  factors that could cause actual  results to differ
materially from those indicated in the forward-looking statements;  accordingly,
there can be no assurance  that such  indicated  result will be realized.  These
factors include legislative and regulatory  initiatives  regarding  deregulation
and restructuring of the banking industry; the extent and timing of the entry of
additional competition in the Company's markets;  potential business strategies,
including acquisitions or dispositions of assets or internal restructuring, that
may be pursued by the Company; state and Federal banking regulations; changes in
or  application  of  environmental  and other laws and  regulations to which the
Company is subject;  political,  legal and economic conditions and developments;
financial  market  conditions and the results of financing  efforts;  changes in
commodity  prices and  interest  rates;  weather,  natural  disasters  and other
catastrophic  events;  and other factors discussed in the Company's filings with
the  Securities  and Exchange  Commission,  including this Annual Report on Form
10-KSB.  The words  "believe",  "expect",  "anticipate",  "project"  and similar
expressions  signify  forward-looking  statements.  Readers are cautioned not to
place undue reliance on any  forward-looking  statements made by or on behalf of
the Company.  Any such  statement  speaks only as of the date the  statement was
made.   The  Company   undertakes   no   obligation  to  update  or  revise  any
forward-looking statements.  Additional information with respect to factors that
may  cause  results  to  differ  materially  from  those  contemplated  by  such
forward-looking  statements is included in the Company's  current and subsequent
filings with the Securities and Exchange Commission.

General

     The Company's  principal  asset is its ownership of the Bank.  Accordingly,
the Company's results of operations are primarily  dependent upon the results of
operations of the Bank.  The Bank conducts a commercial  banking  business which
consists of attracting deposits from the general public and applying those funds
to the  origination  of  commercial,  consumer and real estate loans  (including
commercial  loans  collateralized  by real  estate).  The  Bank's  profitability
depends  primarily  on net  interest  income,  which is the  difference  between
interest  income  generated  from  interest-earning   assets  (i.e.,  loans  and
investments) less the interest expense incurred on interest-bearing  liabilities
(i.e., customer deposits and borrowed funds). Net interest income is affected by
the   relative   amounts  of   interest-earning   assets  and   interest-bearing
liabilities,  and the  interest  rate  paid and  earned on these  balances.  Net
interest income is dependent upon the Bank's interest rate spread,  which is the
difference between the average yield earned on its  interest-earning  assets and
the average rate paid on its interest-bearing liabilities. When interest-earning
assets  approximates  or  exceeds  interest-bearing  liabilities,  any  positive
interest rate spread will generate interest income.  The interest rate spread is
impacted by interest rates, deposit flows and loan demand. Additionally,  and to
a lesser  extent,  the Bank's  profitability  is affected by such factors as the
level of noninterest income and expenses,  the provision for loan losses and the
effective tax rate. Noninterest income consists primarily of loan and other fees
and income from the sale of investment securities.  Noninterest expenses consist
of compensation  and benefits,  occupancy-related  expenses,  deposit  insurance
premiums paid to the FDIC and other operating expenses.




                                      -20-
<PAGE>


Results of Operations For Years Ended December 31, 1999 and 1998

     The  Company's  results of  operations  are  determined  by its  ability to
effectively manage interest income and expense,  to minimize loan and investment
losses, to generate noninterest income and to control noninterest expense. Since
interest  rates are determined by market forces and economic  conditions  beyond
the  control of the  Company,  the ability to generate  net  interest  income is
dependent upon the Bank's ability to obtain an adequate  spread between the rate
earned  on  interest-earning  assets  and  the  rate  paid  on  interest-bearing
liabilities.  Thus, the key  performance  measure for net interest income is the
interest margin or net yield,  which is  taxable-equivalent  net interest income
divided by average earning assets.

     The primary  component of consolidated  earnings is net interest income, or
the difference between interest income on  interest-earning  assets and interest
paid on  interest-bearing  liabilities.  The net interest margin is net interest
income   expressed  as  a  percentage   of  average   interest-earning   assets.
Interest-earning  assets  consist of loans,  investment  securities  and Federal
funds  sold.   Interest-bearing   liabilities  consist  of  deposits  and  other
short-term  borrowings.  A portion of  interest  income is earned on  tax-exempt
investments,  such as state and  municipal  bonds.  In an  effort to state  this
tax-exempt  income and its  resultant  yield on a basis  comparable to all other
taxable  investments,  an  adjustment  is  made  to  analyze  this  income  on a
taxable-equivalent basis.

     The Company's net interest margin  decreased 17 basis points,  or 3.23%, to
5.10%  in  1999,   as  compared   to  5.27%  in  1998.   The  yield  on  average
interest-earning  assets decreased 46 basis points,  or 4.97%, to 8.80% in 1999,
as compared to 9.26% in 1998. The interest rate paid on average interest-bearing
liabilities  decreased 22 basis points,  or 4.41%, to 4.77% in 1999, as compared
to 4.99%  in  1998.  Net  interest  income  on a  taxable-equivalent  basis  was
$3,093,000 in 1999 as compared to $2,339,000 in 1998,  representing  an increase
of $754,000 or 32.24%.  The  decrease  in the yield on  interest-earning  assets
offset by a decrease in the rate paid on interest-bearing  liabilities  resulted
in a decrease in net interest income of $240,000.  This decrease in net interest
income due to a change in rates was offset by an increase of $994,000  generated
on an  increase  in  volume of  interest-earning  assets  over  interest-bearing
liabilities in 1999.

     Average  interest-earning  assets  increased  $16,197,000,  or  36.46%,  to
$60,615,000  in  1999  from   $44,418,000  in  1998.   Average  loans  increased
$13,546,000;   average  Federal  funds  sold  increased  $690,000;  and  average
investments  increased  $1,961,000.  The  increase  in average  interest-earning
assets was  accompanied  by an increase of  $14,311,000,  or 32.84%,  in average
deposits to $57,889,000 in 1999 from $43,578,000 in 1998.  Approximately  20% of
the average deposits were noninterest-bearing deposits in 1999 and 1998.

     Average total assets increased  $15,227,00 or 31.25% to $63,954,000 in 1999
as compared to $48,727,000  in 1998.  Loan demand was much stronger in 1999 than
in 1998 as  evidenced  by  average  loan to  deposit  ratio of 85.02% in 1999 as
compared to 81.85% in 1998.




                                      -21-
<PAGE>


     The allowance for loan losses is  established  through a provision for loan
losses charged to expense and  represents a reserve for potential  losses in the
loan  portfolio.  Loans are charged  against the  allowance for loan losses when
management  believes that the  collectibility of the principal is unlikely.  The
allowance  is an amount  that  management  believes  will be  adequate to absorb
possible  losses  on  existing  loans  that may  become  uncollectible  based on
evaluations of the  collectibility of loans and prior loan loss experience (when
sufficient  time elapses to establish  experience).  The  evaluations  take into
consideration  such  factors  as  changes  in the  nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem and/or impaired
loans and current economic  conditions that may affect the borrowers' ability to
pay. The  adequacy of the  allowance  for loan losses is evaluated  periodically
based on a review  of all  significant  loans,  with a  particular  emphasis  on
nonaccruing,   past  due  and  other  loans  that  management  believes  require
attention.

     The provision for loan losses is a charge to earnings in the current period
to replenish the allowance for loan losses and maintain it at a level management
has determined to be adequate.  Based upon  management's  evaluation of the loan
portfolio  and the  potential  loan  risk  associated  with  specific  loans and
selected loan categories,  management  determined that no provision was required
to be charged to earnings in 1999 or in 1998. The allowance for loan losses as a
percentage of total loans outstanding  amounted to 2.63% at December 31, 1999 as
compared  to 3.03% at December  31,  1998.  Management  considers  the  year-end
allowances adequate to cover potential losses in the loan portfolio.

     Following  is a  comparison  of  noninterest  income  for the  years  ended
December 31, 1999 and 1998.
<TABLE>
<CAPTION>

                                                                                                         Increase
                                                                            1999            1998         (Decrease)
                                                                      --------------- --------------- ---------------

            <S>                                                       <C>             <C>             <C>
            Service charges on deposit accounts                       $      524,000  $      447,000  $       77,000
            Other commissions and fees                                        37,000          26,000          11,000
            Origination fees on mortgage loans                                34,000          46,000         (12,000)
            Other                                                             75,000          70,000           5,000
                                                                      --------------- --------------- ---------------

                                                                      $      670,000  $      589,000  $       81,000
                                                                      =============== =============== ===============
</TABLE>

     Total noninterest income increased $81,000, or 13.75%, in 1999. However, as
a percentage of average assets,  noninterest income decreased from 1.21% in 1998
to 1.05% in 1999, a 13.22% decrease.  The increase in service charges on deposit
accounts of $77,000,  or 17.23%, is attributable to an increase of approximately
$6,573,000,  or 35.28%,  in average demand  deposits and savings in 1999.  Other
commissions and fees increased $11,000,  or 42.31%,  due to volume.  Origination
fees on mortgage loans decreased  $12,000,  or 26.09%,  in 1999. The Bank funded
and retained  more new  mortgages in 1999,  as opposed to  originating  them for
other financial  institutions.  Other income  increased $5,000 in 1999, which is
net of $28,000 in  nonrecurring  loan  referral  fees earned in 1998.  The gross
increase of $33,000 in other income is  comprised  of an $8,000  increase in ATM
and debit card fees, gains on ORE transactions,  and other miscellaneous  income
items.



                                      -22-
<PAGE>



     Following  is an  analysis  of  noninterest  expense  for the  years  ended
December 31, 1999 and 1998.
<TABLE>
<CAPTION>


                                                                                                            Increase
                                                                          1999              1998           (Decrease)
                                                                    -----------------  ---------------- -----------------

             <S>                                                    <C>                <C>              <C>
             Salaries and employee benefits ....................... $      1,251,000   $       992,000  $        259,000
             Equipment and occupancy ..............................          279,000           261,000            18,000
             Data processing ......................................           89,000           106,000           (17,000)
             Printing and office supplies .........................           72,000            67,000             5,000
             Legal and professional ...............................           80,000           101,000           (21,000)
             Advertising and business development .................           68,000            40,000            28,000
             Training and travel ..................................          148,000            78,000            70,000
             Other ................................................          334,000           336,000            (2,000)
                                                                    -----------------  ---------------- -----------------

                                                                    $      2,321,000   $     1,981,000  $        340,000
                                                                    =================  ================ =================
</TABLE>

     Total noninterest expense increased $340,000,  or 17.16%, in 1999. However,
as a percentage of average assets,  noninterest  expense  decreased  10.81% from
4.07% in 1998 to  3.63%  in  1999.  Salaries  and  employee  benefits  increased
$259,000,  or 26.11%,  due to an increase in Bank personnel and lending officers
from 28  employees  as of December  31, 1998 to 35  employees as of December 31,
1999, a 25% increase.  Equipment and occupancy expenses  increased  $18,000,  or
6.90%, in 1999 due for the most part to increased  depreciation on new equipment
and an increase in utility costs.  Data processing  costs were $17,000 less than
in 1998. In 1998, the Bank spent an additional $24,000 in upgrading software and
other  costs in  preparation  for the Year  2000.  Legal and  professional  fees
decreased  $21,000,  or 20.79%,  in 1999 due to a  decrease  in  accounting  and
auditing fees.  Advertising and business development  increased $28,000, or 70%,
due to an increase in  advertising  in the media and in various  promotions  for
Bank customers. Travel and training costs increased $70,000, or 89.74%, in 1999.
Most of this  increase  relates to $60,000  paid to a  consulting  team from the
Bank's core software provider to perform an operational efficiency review and to
provide needed training and operational procedures for Bank personnel.

 Liquidity and Capital Resources

     Liquidity management involves the matching of the cash flow requirements of
customers who may be either  depositors  desiring to withdraw funds or borrowers
needing  assurance that sufficient  funds will be available to meet their credit
needs and the  ability  of the  Company  and the Bank to meet those  needs.  The
Company  and the Bank  seek to meet  liquidity  requirements  primarily  through
management  of  short-term  investments  (principally  Federal  funds  sold) and
monthly  amortizing  loans.  Another  source of  liquidity  is the  repayment of
maturing  single  payment  loans.  The Bank is a member of the Federal Home Loan
Bank of  Atlanta  and as such has the  ability  to  obtain  advances  therefrom,
although  the cost of such  advances  exceed  lower  cost  alternatives  such as
deposits from the local community.  The Bank had an outstanding advance from the
Federal  Home Loan Bank of Atlanta of $55,000 at December  31, 1999 at a rate of
6.99%.  The Bank also has the ability to borrow and purchase  Federal funds from
other financial institutions on a short-term basis, if needed.



                                      -23-
<PAGE>



     The  liquidity  and  capital  resources  of the  Company  and the  Bank are
monitored on a periodic basis by state and Federal  regulatory  authorities.  As
determined under guidelines  established by these  regulatory  authorities,  the
Bank's liquidity ratio at December 31, 1999 was considered satisfactory. At that
date, the Bank's  short-term  investments  were adequate to cover any reasonable
anticipated  immediate need for funds. The Company and the Bank were aware of no
events or trends  likely to  result  in a  material  change in their  liquidity.
During 1999, the Company increased its capital by retaining earnings of $925,000
and by $55,000 from proceeds upon exercise of stock  options.  In addition,  the
Company  reduced  capital by purchasing 500 shares of common stock  amounting to
$9,000 for the  treasury.  After  recording a decrease in capital of $63,000 for
unrealized losses on securities,  net of taxes, total capital increased $908,000
to $4,852,000 from $3,944,000 at December 31, 1998.

     At  December  31,  1999,  the  Company  was in  process of  completing  the
construction  of an annex to its main  office.  The  estimated  cost to complete
construction,  landscape,  furnish and equip the new  facility is  approximately
$635,000. No other major capital expenditures are planned for 2000.

     In accordance  with risk capital  guidelines  issued by the Federal Reserve
Board,  the Company is required to maintain a minimum  standard of total capital
to weighted  risk assets of 8%.  Additionally,  all member  banks must  maintain
"core" or "Tier 1" capital of at least 4% of total  assets  ("leverage  ratio").
Member  banks  operating  at or near the 4% capital  level are  expected to have
well-diversified   risks,  including  no  undue  interest  rate  risk  exposure,
excellent control systems,  good earnings,  high asset quality, and well managed
on- and off-balance  sheet  activities;  and, in general,  be considered  strong
banking organizations with a composite 1 rating under the CAMEL rating system of
banks. For all but the most highly rated banks meeting the above conditions, the
minimum leverage ratio is to be 4% plus an additional 100 to 200 basis points.

     The following table summarizes the regulatory capital levels of the Company
at December 31, 1999.
<TABLE>
<CAPTION>

                                                      Actual                     Required                     Excess
                                             -------------------------   -------------------------   -------------------------
                                               Amount       Percent         Amount      Percent         Amount      Percent
                                             -----------  ------------   -----------  ------------   -------------------------
                                                                          (Dollars in Thousands)
                                             ---------------------------------------------------------------------------------

              <S>                            <C>              <C>        <C>              <C>        <C>               <C>
              Leverage capital ............. $    4,901       7.66 %     $    2,558       4.00 %     $    2,343        3.66 %
              Risk-based capital:
               Core capital ................      4,901       9.98            1,964       4.00            2,937        5.98
               Total capital ...............      5,524      11.25            3,928       8.00            1,596        3.25
</TABLE>

     The  Bank  also  met its  individual  regulatory  capital  requirements  at
December 31, 1999.


                                      -24-
<PAGE>


 Average Balances and Net Income Analysis

     The following table sets forth the amount of the Company's  interest income
or  interest   expense  for  each  category  of   interest-earning   assets  and
interest-bearing   liabilities   and  the  average   interest   rate  for  total
interest-earning  assets and total  interest-bearing  liabilities,  net interest
spread and net yield on average  interest-earning  assets.  Federally tax-exempt
income is presented  on a  taxable-equivalent  basis  assuming a 34% Federal tax
rate.
<TABLE>
<CAPTION>

                                                                Year Ended December 31,
                          ----------------------------------------------------------------------------------------------------
                                        1999                              1998                              1997
                          ---------------------------------  --------------------------------  -------------------------------
                                                                (Dollars in Thousands)
                          ----------------------------------------------------------------------------------------------------
                                      Interest    Average               Interest    Average               Interest   Average
                           Average     Income/     Yield/     Average    Income/     Yield/    Average    Income/     Yield/
                           Balance     Expense   Rate Paid    Balance    Expense   Rate Paid   Balance    Expense    Rate Paid
                          ----------- ----------  ---------  ---------- ----------  ---------  ---------  ---------  ---------
<S>                       <C>         <C>           <C>      <C>        <C>          <C>       <C>        <C>          <C>
ASSETS
  Interest-earning assets:
   Loans, net of
      unearned interest . $   49,216  $   4,709     9.57 %   $  35,670  $   3,615    10.13 %   $ 27,336   $  2,698     9.87 %
   Investment securities:
    Taxable .............      6,682        389     5.82         4,806        291     6.05        8,291        511     6.16
    Nontaxable ..........         85          5     5.88             -          -        -            -          -        -
   Federal funds sold ...      4,632        231     4.99         3,942        206     5.23        3,128        173     5.53
                          ----------- ----------             ---------- ----------             ---------  ---------

        Total interest-
           earning assets     60,615      5,334     8.80        44,418      4,112     9.26       38,755      3,382     8.73
                          ----------- ----------             ---------- ----------             ---------  ---------

  Noninterest-earning
   assets:
   Cash .................      3,485                             3,009                            2,953
   Allowance for loan
      losses ............     (1,377)                           (1,244)                          (1,201)
      Unrealized gain
       on available
       for sale securities       (32)                                19                              (3)
      Other assets ......      1,263                             2,525                            2,985
                          -----------                        ----------                        ---------

        Total
        noninterest-
           earning assets      3,339                             4,309                            4,734
                          -----------                        ----------                        ---------

        Total assets .... $   63,954                         $  48,727                         $ 43,489
                          ===========                        ==========                        =========

</TABLE>

                                      -25-
<PAGE>

<TABLE>
<CAPTION>


                                                                Year Ended December 31,
                           ---------------------------------------------------------------------------------------------------
                                         1999                             1998                             1997
                           --------------------------------- -------------------------------- --------------------------------
                                                                 (Dollars in Thousands)
                           ---------------------------------------------------------------------------------------------------
                                       Interest    Average              Interest   Average                Interest   Average
                            Average     Income/    Yield/     Average   Income/     Yield/     Average    Income/     Yield/
                            Balance     Expense   Rate Paid   Balance   Expense   Rate Paid    Balance    Expense    Rate Paid
                           ----------- ---------- ---------- --------- ---------- ----------- ---------- ----------- ---------
<S>                        <C>         <C>           <C>     <C>        <C>         <C>        <C>       <C>           <C>
LIABILITIES AND
   STOCKHOLDERS'
   EQUITY
   Interest-bearing liabilities:
   Savings and
      interest-bearing
      demand deposits .... $   13,736  $     369     2.69%   $    9,732 $    236     2.42%    $   8,198  $      227    2.77%
   Time deposits .........     32,686      1,831     5.60        24,948    1,478     5.92        22,259       1,280    5.75
   Other borrowings ......        569         41     7.21           881       59      6.7         2,275         139    6.11
                           ----------- ----------            --------------------             ---------- -----------
      Total
      interest-bearing
        liabilities ......     46,991      2,241     4.77        35,561    1,773     4.99        32,732       1,646    5.03
                           ----------- ----------            --------------------             ---------- -----------

   Noninterest-bearing
      liabilities and
      stockholders' equity:
      Demand deposits ....     11,467                             8,898                           7,190
      Other liabilities ..      1,122                               615                             458
      Stockholders' equity      4,374                             3,653                           3,109
                           -----------                       -----------                      ----------

      Total
      noninterest-bearing
        liabilities and
        stockholders'
        equity ...........     16,963                            13,166                          10,757
                           -----------                       -----------                      ----------

Total liabilities and
stockholders'
   equity ................ $   63,954                        $   48,727                       $  43,489
                           ===========                       ===========                      ==========

Interest rate spread .....                           4.03%                           4.27%                             3.70%
                                                  ==========                      ===========                        =========

Net interest income ......             $   3,093                        $  2,339                         $    1,736
                                       ==========                       =========                        ===========

Net interest margin ......                           5.10%                           5.27%                             4.48%
                                                  ==========                      ===========                        =========
</TABLE>


                                      -26-
<PAGE>

Rate and Volume Analysis

     The following table reflects the changes in net interest  income  resulting
from changes in interest  rates and from asset and liability  volume.  Federally
tax-exempt  interest is presented on a  taxable-equivalent  basis assuming a 34%
Federal  tax  rate.  The  change  in  interest  attributable  to rate  has  been
determined  by applying  the change in rate  between  years to average  balances
outstanding  in the later year.  The change in  interest  due to volume has been
determined  by applying  the rate from the earlier year to the change in average
balances  outstanding  between years.  Thus,  changes that are not solely due to
volume have been consistently attributed to rate.
<TABLE>
<CAPTION>

                                                                        Year Ended December 31,
                                           ----------------------------------------------------------------------------------
                                                        1999 vs. 1998                             1998 vs. 1997
                                           ----------------------------------------  ----------------------------------------
                                                                        (Dollars in Thousands)
                                           ----------------------------------------------------------------------------------
                                             Increase         Changes Due To          Increase          Changes Due To
                                                         --------------------------                --------------------------
                                            (Decrease)        Rate        Volume     (Decrease)        Rate         Volume
                                           ------------- ------------- ------------  ------------  ------------  ------------
<S>                                        <C>           <C>           <C>           <C>           <C>           <C>
Increase (decrease) in:
   Income from earning assets:
      Interest and fees on loans ......... $      1,094  $      (279)  $     1,373   $       917   $        94   $       823
   Interest on securities:
      Taxable ............................           98          (16)          114         (220)           (5)         (215)
      Nontaxable .........................            5             -            5             -             -             -
   Interest on Federal funds .............           25          (11)           36            33          (12)            45
                                           ------------- ------------- ------------  ------------  ------------  ------------
        Total interest income ............        1,222         (306)        1,528           730            77           653
                                           ------------- ------------- ------------  ------------  ------------  ------------

Expense from interest-bearing liabilities:
   Interest on savings and interest-
      bearing demand deposits ............          133            36           97             9          (33)            42
   Interest on time deposits .............          353         (105)          458           198            43           155
   Interest on other borrowings ..........         (18)             3         (21)          (80)             5          (85)
                                           ------------- ------------- ------------  ------------  ------------  ------------
        Total interest expense ...........          468          (66)          534           127            15           112
                                           ------------- ------------- ------------  ------------  ------------  ------------

             Net interest income ......... $        754  $      (240)  $       994   $       603   $        62   $       541
                                           ============= ============= ============  ============  ============  ============
</TABLE>


                                      -27-
<PAGE>


Asset/Liability Management

     A principal objective of the Company's asset/liability  management strategy
is to  minimize  its  exposure  to changes in  interest  rates by  matching  the
maturity and repricing horizons of interest-earning  assets and interest-bearing
liabilities.  At FNC this  strategy is overseen in part through the direction of
the Investment  Committee  which  establishes  policies and monitors  results to
control interest rate sensitivity.  At the Bank, the strategy is overseen by the
Board of Directors with the direction and strategy being directed principally by
the President of the Bank.

     As part of the Banks' interest rate risk management  policy, the Investment
Committee or Board examines the extent to which its assets and  liabilities  are
"interest  rate-sensitive" and monitors its interest  rate-sensitivity "gap". An
asset or  liability  is  considered  to be  interest  rate-sensitive  if it will
reprice or mature within the time period analyzed, usually one year or less. The
interest  rate-sensitivity  gap is the difference  between the  interest-earning
assets and  interest-bearing  liabilities  scheduled to mature or reprice within
such time  period.  A gap is  considered  positive  when the amount of  interest
rate-sensitive assets exceeds the amount of interest rate-sensitive liabilities.
A gap  is  considered  negative  when  the  amount  of  interest  rate-sensitive
liabilities  exceeds  the  interest  rate-sensitive  assets.  During a period of
rising  interest  rates,  a  negative  gap would  tend to  adversely  affect net
interest income, while a positive gap would tend to result in an increase in net
interest  income.  Conversely,  during a period of  falling  interest  rates,  a
negative gap would tend to result in an increase in net interest income, while a
positive  gap  would  tend to  adversely  affect  net  interest  income.  If the
Company's assets and liabilities  were equally flexible and moved  concurrently,
the impact of any increase or decrease in interest rates on net interest  income
would be minimal.

     A simple  interest  rate "gap"  analysis  by itself may not be an  accurate
indicator  of how net  interest  income  will be affected by changes in interest
rates.  Accordingly,  the  Investment  Committee or Board also evaluates how the
repayment  of  particular  assets  and  liabilities  is  impacted  by changes in
interest  rates.  Income  associated  with  interest-earning  assets  and  costs
associated with  interest-bearing  liabilities may not be affected  uniformly by
changes in interest rates. In addition, the magnitude and duration of changes in
interest  rates  may have a  significant  impact  on net  interest  income.  For
example,  although certain assets and liabilities may have similar maturities or
periods of repricing,  they may react in different  degrees to changes in market
interest  rates.  Interest  rates on  certain  types of assets  and  liabilities
fluctuate in advance of changes in general market interest rates, while interest
rates on other  types  may lag  behind  changes  in  general  market  rates.  In
addition,  certain assets, such as adjustable rate mortgage loans, have features
((generally referred to as "interest rate caps") which limit changes in interest
rates on a  short-term  basis and over the life of the asset.  In the event of a
change in interest  rates,  prepayment  and early  withdrawal  levels also could
deviate  significantly  from those assumed in calculating the interest rate gap.
The ability of many  borrowers  to service  their debts also may decrease in the
event of an interest rate increase.

     As of December 31, 1999, the Company's  cumulative  one-year  interest rate
sensitivity   gap   ratio   was  75%.   This   indicates   that  the   Company's
interest-bearing  liabilities  will reprice  during this period at a rate faster
than the Company's  interest-earning  assets. However,  management believes that
the type and amount of the  Company's  interest  rate-sensitive  liabilities  (a
significant  portion of which are  composed  of money  market,  NOW and  savings
accounts  whose yields,  to a certain  extent,  are subject to the discretion of
management) may reduce the potential  impact that a rise in interest rates might
have on the  Company's  net  interest  income.  In  addition,  the  Company  has
borrowing  agreements with three  correspondent  banks and the Federal Home Loan
Bank to provide temporary liquidity as necessary.

                                      -28-
<PAGE>


     The  following  table sets forth the  distribution  of the repricing of the
Company's  earning  assets and  interest-bearing  liabilities as of December 31,
1999, the interest rate  sensitivity gap (i.e.,  interest rate sensitive  assets
less  interest  rate  sensitive  liabilities),   the  cumulative  interest  rate
sensitivity gap ratio (i.e.,  interest rate sensitive assets divided by interest
rate  sensitivity  liabilities)  and the cumulative  sensitivity gap ratio.  The
table also sets forth the time periods in which earning  assets and  liabilities
will mature or may reprice in accordance with their contractual terms.  However,
the table does not  necessarily  indicate  the impact of general  interest  rate
movements on the net interest  margin since the repricing of various  categories
of assets and  liabilities is subject to competitive  pressures and the needs of
the Banks' customers.  In addition,  various assets and liabilities indicated as
repricing  within the same period may in fact reprice at different  times within
such period and at different rates.
<TABLE>
<CAPTION>
                                                                                 At December 31, 1999
                                                          --------------------------------------------------------------------
                                                                             Maturing or Repricing Within
                                                          --------------------------------------------------------------------
                                                            Zero to        Three         One to         Over
                                                             Three       Months to        Five          Five
                                                            Months        One Year       Years         Years         Total
                                                          ------------  ------------- ------------- ------------- ------------
                                                                                (Dollars in Thousands)
                                                          --------------------------------------------------------------------
<S>                                                       <C>           <C>           <C>           <C>           <C>
Earning assets:
   Interest-bearing deposits in banks ................... $        17   $          -  $          -  $          -  $        17
   Federal funds sold ...................................       1,528              -             -             -        1,528
   Investment securities ................................         179            135         7,893            50        8,257
   Loans ................................................      17,145          6,763        27,982         2,278       54,168
                                                          ------------  ------------- ------------- ------------- ------------
                                                               18,869          6,898        35,875         2,328       63,970
                                                          ------------  ------------- ------------- ------------- ------------
Interest-bearing liabilities:
   Interest-bearing demand deposits (1) .................           -          3,499         9,638             -       13,137
   Savings (1) ..........................................           -              -         2,000             -        2,000
   Certificates less than $100,000 ......................       5,919         13,815         4,176            13       23,923
   Certificates, $100,000 and over ......................       3,778          5,573         1,374             -       10,725
   Federal funds purchased ..............................       1,250              -             -             -        1,250
   Notes payable ........................................         500              -             -             -          500
   FHLB borrowings ......................................           -             10            40             5           55
                                                          ------------  ------------- ------------- ------------- ------------
                                                               11,447         22,897        17,228            18       51,590
                                                          ------------  ------------- ------------- ------------- ------------

Interest rate sensitivity gap ........................... $     7,422   $   (15,999)  $     18,647  $      2,310  $    12,380
                                                          ============  ============= ============= ============= ============

Cumulative interest rate sensitivity gap ................ $     7,422   $    (8,577)  $     10,070  $     12,380
                                                          ============  ============= ============= =============

Interest rate sensitivity gap ratio .....................        1.65           0.30          2.08        129.33
                                                          ============  ============= ============= =============

Cumulative interest rate sensitivity gap ratio ..........        1.65           0.75          1.20          1.24
                                                          ============  ============= ============= =============
</TABLE>

(1) The Company has found that NOW checking  accounts  and savings  deposits are
generally  not  sensitive to changes in interest  rates and,  therefore,  it has
placed such liabilities in the "One to Five Years"  category.  It has also found
that the  money-market  checking  deposits  reprice  between three months to one
year, on the average.


                                      -29-
<PAGE>

Investment Portfolio

     The Company manages the mix of asset and liability  maturities in an effort
to control the effects of changes in the general level of interest  rates on net
interest income. See " - Asset/Liability  Management."  Except for its effect on
the general level of interest  rates,  inflation does not have a material impact
on the Company due to the rate  variability  and  short-term  maturities  of its
earning  assets.  In  particular,  approximately  44% of the loan  portfolio  is
comprised  of loans which  mature or reprice  within one year or less.  Mortgage
loans,  primarily  with  five- to  fifteen-year  maturities,  are also made on a
variable  rate basis with  rates  being  adjusted  every one to five  years.  In
contrast, 96% of the investment portfolio matures or reprices after one year.

Types of Investments

     The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>

                                                                                 Gross            Gross
                                                             Amortized        Unrealized       Unrealized           Fair
                                                                Cost             Gains           Losses            Value
                                                           ---------------   --------------   --------------   ---------------
                                                                                 (Dollars in Thousands)
                                                           -------------------------------------------------------------------
                <S>                                        <C>               <C>              <C>              <C>
                Securities Available for Sale
                   December 31, 1999:
                   U. S. Treasury and government
                      agencies ........................... $        3,239    $           -    $        (74)    $        3,165
                                                           ===============   ==============   ==============   ===============

                   December 31, 1998:
                   U. S. Government and agency
                      agencies ........................... $        4,259    $          21    $           -    $        4,280
                                                           ===============   ==============   ==============   ===============

                Securities Held to Maturity
                   December 31, 1999:
                   U. S. Treasury and government
                      agencies ........................... $        4,483    $           -    $        (46)    $        4,437
                   State, county and municipal
                      securities .........................            295                -              (3)               292
                                                           ---------------   --------------   --------------   ---------------

                                                           $        4,778    $           -    $        (49)    $        4,729
                                                           ===============   ==============   ==============   ===============
</TABLE>

     Other  investments  consist of Federal  Reserve Bank stock and Federal Home
Loan Bank stock.  These  investments are carried at cost as such investments are
not readily  marketable.  At December  31, 1999 and 1998,  the  Company's  total
investment  in these  restricted  equity  securities  was $314,000 and $474,000,
respectively.


                                      -30-
<PAGE>


Maturities

     The amounts of  investment  securities  in each category as of December 31,
1999  are  shown  in the  following  table  according  to  contractual  maturity
classifications (1) one year or less, (2) after one year through five years, (3)
after five years through ten years, and (4) after ten years.
<TABLE>
<CAPTION>

                                                                    U.S. Treasury and                State, County and
                                                                   Government Agencies             Municipal Securities
                                                                                   Yield                           Yield
                                                                 Amount             (1)           Amount          (1) (2)
                                                               ------------     ------------    ------------    ------------
                                                                                  (Dollars in Thousands)
                                                               -------------------------------------------------------------
<S>                                                            <C>                <C>           <C>                <C>
Maturity:
   One year or less .......................................... $         -            - %       $         -            - %
   After one year through five years .........................       7,648         5.94                 245         6.65
   After five years through ten years ........................           -            -                  50         6.14
   After ten years ...........................................           -            -                   -            -
                                                               ------------     --------        ------------    ----------
                                                               $     7,648         5.94 %       $       295         6.56 %
                                                               ============     =========       ============    ==========
</TABLE>

(1) Yields were computed using coupon  interest,  adding  discount  accretion or
subtracting premium  amortization,  as appropriate,  on a ratable basis over the
life of each  security.  The weighted  average yield for each maturity range was
computed using the acquisition price of each security in that range.

(2) Yields on state,  county and  municipal  securities  are stated on a taxable
equivalent basis using a tax rate of 34%.


                                      -31-
<PAGE>

Loan Portfolio

     The  amount of loans  outstanding  at the  indicated  dates is shown in the
following table according to type of loans.
<TABLE>
<CAPTION>

                                                                                                   December 31,
                                                                                         ----------------------------------
                                                                                               1999               1998
                                                                                         ---------------    ---------------
                                                                                              (Dollars in Thousands)
                                                                                         ----------------------------------

       <S>                                                                               <C>                <C>
       Commercial and financial ........................................................ $        8,015     $        6,345
       Agricultural ....................................................................          1,431              1,214
       Real estate - construction ......................................................          2,545              1,210
       Real estate - mortgage, farmland ................................................          8,419              7,916
       Real estate - mortgage, other ...................................................         27,848             21,156
       Consumer installment ............................................................          5,911              4,149
                                                                                         ---------------    ---------------
                                                                                                 54,169             41,990
       Allowance for loan losses .......................................................         (1,423)            (1,274)
                                                                                         ---------------    ---------------
       Loans, net ...................................................................... $       52,746     $       40,716
                                                                                         ===============    ===============
</TABLE>

Maturities and Sensitivity of Loans to Changes in Interest Rates

     The Company's loan portfolio, as of December 31, 1999 was made up primarily
of short-term fixed rate loans or variable rate loans.  The average  contractual
life on installment  loans is  approximately  three years,  while  mortgages are
generally  variable  over one-to  five-year  periods.  Following is a summary of
loans which presents  separately the amount of loans  outstanding as of December
31, 1999 in each category according to contractual maturity classifications: (i)
one year or less,  (ii) after one year through five years,  and (iii) after five
years.
<TABLE>
<CAPTION>

                                                                          Due in      After One       After
                                                                            One        Through         Five
                                                                           Year       Five Years      Years         Total
                                                                        ------------ ------------- ------------- -------------
                                                                                       (Dollars in Thousands)
                                                                        ------------------------------------------------------

          <S>                                                           <C>          <C>           <C>           <C>
          Commercial and financial .................................... $     3,779  $      3,269  $        967  $      8,015
          Agricultural ................................................         544           545           342         1,431
          Real estate - construction ..................................       1,533           998            14         2,545
          Real estate - mortgage, farmland ............................       2,094         3,925         2,400         8,419
          Real estate - mortgage, other ...............................       6,258        18,509         3,081        27,848
          Consumer installment ........................................       1,945         3,291           675         5,911
                                                                        ------------ ------------- ------------- -------------

                  Total ............................................... $    16,153  $     30,537  $      7,479  $     54,169
                                                                        ============ ============= ============= =============
</TABLE>


                                      -32-
<PAGE>


     The  following  table  summarizes  loans at December  31, 1999 with the due
dates after one year which (i) have  predetermined  interest rates and (ii) have
floating or adjustable interest rates.
<TABLE>
<CAPTION>

                                                                                                              December 31,
                                                                                                                  1999
                                                                                                               (Dollars in
                                                                                                               Thousands)
                                                                                                             ----------------

   <S>                                                                                                       <C>
   Predetermined interest rates ...........................................................................  $        27,371
   Floating or adjustable interest rates ..................................................................           10,645
                                                                                                             ----------------
                                                                                                             $        38,016
                                                                                                             ================
</TABLE>


Nonperforming Loans

     The following  table  presents,  at the dates  indicated,  the aggregate of
nonperforming loans for the categories indicated.
<TABLE>
<CAPTION>
                                                                                                     December 31,
                                                                                           ----------------------------------
                                                                                                 1999              1998
                                                                                           ---------------   ----------------
                                                                                                (Dollars in Thousands)
                                                                                           ----------------------------------

       <S>                                                                                 <C>               <C>
       Loans accounted for on a nonaccrual basis ......................................... $          380    $           448

       Instalment loans and term loans contractually past due ninety
          days or more as to interest or principal payments and still accruing ...........              3                  4

       Loans, the term of which have been renegotiated to provide a
          reduction or deferral of interest or principal because of
          deterioration in the financial position of the borrower ........................              -                  -

       Loans now current about which there are serious doubts as to
          the ability of the borrower to comply with present loan
          repayment terms ................................................................              -                  -
</TABLE>

     In  the  opinion  of  management,   any  loans   classified  by  regulatory
authorities as substandard or special mention that have not been disclosed above
do not (i)  represent or result from trends or  uncertainties  which  management
reasonably expects will materially impact future operating results, liquidity or
capital resources, nor (ii) represent material credits about which management is
aware of any  information  which causes  management to have serious doubts as to
the ability of such borrowers to comply with the loan repayment terms. Any loans
classified by regulatory authorities as loss have been charged off.

                                      -33-
<PAGE>


Summary of Loan Loss Experience

     The  provision  for  possible  loan losses is created by direct  charges to
operations.  Losses on loans are charged  against the allowance in the period in
which such loans,  in management's  opinion,  become  uncollectible.  Recoveries
during the period are credited to this  allowance.  The factors  that  influence
management's judgment in determining the amount charged to operating expense are
past loan experience,  composition of the loan portfolio, evaluation of possible
future losses,  current  economic  conditions and other  relevant  factors.  The
Company's allowance for loan losses was approximately $1,423,000 at December 31,
1999,  representing  2.63% of year-end  total loans  outstanding  compared  with
approximately  $1,274,000 at December 31, 1998, which represented 3.03% year end
total loans outstanding.

     The allowance for loan losses is reviewed  quarterly  based on management's
evaluation of current risk characteristics of the loan portfolio, as well as the
impact of  prevailing  and expected  economic  business  conditions.  Management
considers the allowance for loan losses  adequate to cover  possible loan losses
on each  outstanding  loan with  particular  emphasis on any problem  loans.  No
assurance can be given,  however,  that adverse economic  circumstances will not
result in increased  losses in the Bank's loan  portfolio,  and require  greater
provisions for loan losses in the future.

Allocation of the Allowance for Loan Losses

     The  following  table sets forth the  breakdown of the  allowance  for loan
losses by loan  category  for the periods  indicated.  Management  believes  the
allowance can be allocated only on an approximate  basis.  The allocation of the
allowance to each  category is not  necessarily  indicative of future losses and
does not  restrict  the use of the  allowance  to  absorb  losses  in any  other
category.
<TABLE>
<CAPTION>

                                                                                      At December 31,
                                                                -------------------------------------------------------------
                                                                            1999                           1998
                                                                ------------------------------ ------------------------------
                                                                                  Percent of                     Percent of
                                                                                   Loans in                       Loans in
                                                                                 Category to                     Category to
                                                                     Amount      Total Loans        Amount       Total Loans
                                                                ---------------- ------------- ----------------  ------------
                                                                                   (Dollars in Thousands)
                                                                -------------------------------------------------------------

<S>                                                             <C>                     <C>    <C>                     <C>
Commercial, financial, industrial and agricultural ............ $           375         17 %   $           325         18 %
Real estate ...................................................             333         72                 303         72
Consumer ......................................................             503         11                 455         10
Unallocated ...................................................             212          -                 191          -
                                                                ---------------- ------------- ----------------  ------------

                                                                $         1,423        100 %   $         1,274        100 %
                                                                ================ ============= ================  ============
</TABLE>


                                      -34-
<PAGE>


Allocation of the Allowance for Loan Losses (Continued)

     The  following  table  presents  an  analysis  of the  Company's  loan loss
experience for the periods indicated:
<TABLE>
<CAPTION>

                                                                                               Year Ended December 31,
                                                                                           ---------------------------------
                                                                                                1999               1998
                                                                                           ---------------   ---------------
                                                                                                (Dollars in Thousands)
                                                                                           ---------------------------------

       <S>                                                                                 <C>               <C>
       Average amount of loans outstanding ............................................... $       49,216    $       35,670
                                                                                           ===============   ===============

       Balance of reserve for possible loan losses at beginning of period ................          1,274             1,159
                                                                                           ---------------   ---------------

       Charge-offs:
          Commercial, financial and agricultural .........................................            (2)              (67)
          Real estate ....................................................................              -               (7)
          Consumer .......................................................................           (61)              (62)
       Recoveries:
          Commercial, financial and agricultural .........................................             25                33
          Real estate ....................................................................             53               126
          Consumer .......................................................................            134                92
                                                                                           ---------------   ---------------
               Net (charge-offs) recoveries ..............................................            149               115
                                                                                           ---------------   ---------------

       Additions to reserve charged to operating expenses ................................              -                 -
                                                                                           ---------------   ---------------

       Balance of reserve for possible loan losses ....................................... $        1,423    $        1,274
                                                                                           ===============   ===============

       Ratio of net loan (charge-offs) recoveries to average loans .......................           .30%              .32%
                                                                                           ===============   ===============
</TABLE>


                                      -35-
<PAGE>

Deposits

     Average amount of deposits and average rate paid thereon,  classified as to
noninterest-bearing   demand  deposits,   interest-bearing  demand  and  savings
deposits and time deposits for the periods indicated are presented below.
<TABLE>
<CAPTION>

                                                                                    Year Ended December 31,
                                                                  ------------------------------------------------------------
                                                                              1999                           1998
                                                                  -----------------------------  -----------------------------
                                                                       Amount         Rate            Amount         Rate
                                                                  ---------------  ------------  ---------------  ------------
                                                                                    (Dollars in Thousands)
                                                                  ------------------------------------------------------------

<S>                                                               <C>                  <C>       <C>                  <C>
Noninterest-bearing demand deposits ............................. $       11,467          - %    $        8,898          - %
Interest-bearing demand and savings deposits ....................         13,736       2.69               9,732       2.42
Time deposits ...................................................         32,686       5.60              24,948       5.92
                                                                  ---------------                ---------------
              Total deposits .................................... $       57,889                 $       43,578
                                                                  ===============                ===============
</TABLE>

     The Company has a large,  stable base of time  deposits,  with little or no
dependence  on volatile  deposits of $100,000  or more.  The time  deposits  are
principally  certificates of deposit and individual retirement accounts obtained
from individual customers.

     The amounts of time  certificates  of deposit issued in amounts of $100,000
or more as of December 31, 1999, are shown below by category,  which is based on
time  remaining  until  maturity  of (i) three  months or less,  (ii) over three
through twelve months and (iii) over twelve months.
<TABLE>
<CAPTION>

                                                                                                            December 31,
                                                                                                                 1999
                                                                                                           ---------------
                                                                                                            (Dollars in
                                                                                                             Thousands)
                                                                                                           ---------------

           <S>                                                                                             <C>
           Three months or less .......................................................................... $        3,778
           Over three through twelve months ..............................................................          5,573
           Over twelve months ............................................................................          1,374
                                                                                                           ---------------
                         Total ........................................................................... $       10,725
                                                                                                           ===============
</TABLE>


                                      -36-
<PAGE>

Return on Assets and Stockholders' Equity

     The following  table shows return on assets (net income  divided by average
total  assets),  return on equity (net income  divided by average  stockholders'
equity),  dividend  payout ratio  (dividends  declared per share  divided by net
income per share) and stockholders' equity to asset ratio (average stockholders'
equity divided by average total assets) for the periods indicated.
<TABLE>
<CAPTION>

                                                                                                 Year Ended December 31,
                                                                                           ------------------------------------
                                                                                                1999                1998
                                                                                           ----------------    ----------------

<S>                                                                                                <C>                 <C>
Return on assets .........................................................................         1.45 %              1.24 %

Return on equity .........................................................................        21.16               16.48

Dividends payout .........................................................................            -                   -

Equity to assets ratio ...................................................................         6.84                 7.5
</TABLE>


Commitments and Lines of Credits

     In the ordinary  course of business,  the Bank has granted  commitments  to
extend credit to approved  customers.  Generally,  these  commitments  to extend
credit  have been  granted  on a  temporary  basis  for  seasonal  or  inventory
requirements and have been approved by the Bank's Board of Directors.  The Banks
have also  granted  commitments  to approved  customers  for standby  letters of
credit.  These  commitments are recorded in the financial  statements when funds
are disbursed or the financial  instruments  become  payable.  The Bank uses the
same credit  policies for these  off-balance  sheet  commitments  as they do for
financial   instruments  that  are  recorded  in  the   consolidated   financial
statements.   Commitments   generally  have  fixed  expiration  dates  or  other
termination  clauses  and may  require  payment  of a fee.  Because  many of the
commitment amounts expire without being drawn upon, the total commitment amounts
do not necessary represent future cash requirements.

     Following is a summary of the commitments  outstanding at December 31, 1999
and 1998.
<TABLE>
<CAPTION>

                                                                                                     December 31,
                                                                                           ----------------------------------
                                                                                                 1999               1998
                                                                                           ---------------    ---------------
                                                                                                (Dollars in Thousands)
                                                                                           ----------------------------------

           <S>                                                                             <C>                <C>
           Commitments to extend credit .................................................. $        7,164     $        4,959
           Standby letters of credit .....................................................            102                120
                                                                                           ---------------    ---------------
                                                                                           $        7,266     $        5,079
                                                                                           ===============    ===============
</TABLE>


                                      -37-
<PAGE>

Impact of Inflation

     The consolidated  financial statements and related  consolidated  financial
data presented  herein have been prepared in accordance with generally  accepted
accounting  principles and practices  within the banking  industry which require
the  measurement  of  financial  position  and  operating  results  in  terms of
historical  dollars without  considering the changes in the relative  purchasing
power of money over time due to  inflation.  Unlike most  industrial  companies,
virtually all the assets and liabilities of a financial institution are monetary
in  nature.  As a result,  interest  rates have a more  significant  impact on a
financial  institution's  performance  than the  effects  of  general  levels of
inflation.


ITEM 7.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The  following   consolidated  financial  statements  of  the  Company  and  its
subsidiaries  are  included on pages F-1 through  F-33 of this Annual  Report on
Form 10-KSB:

Consolidated Balance Sheets - December 31, 1999 and 1998

Consolidated Statements of Income - Years Ended December 31, 1999 and 1998

Consolidated  Statements of Comprehensive Income - Years Ended December 31, 1999
and 1998

Consolidated  Statements of Stockholders' Equity - Years Ended December 31, 1999
and 1998

Consolidated Statements of Cash Flows - Years Ended December 31, 1999 and 1998

Notes to Consolidated Financial Statements.


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     During 1999,  the Company did not change its  accountants  and there was no
disagreement  on any matter of accounting  principles or practices for financial
statement  disclosure that would have required the filing of a current report on
Form 8-K.



                                      -38-
<PAGE>

                                                               PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
         COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT


DIRECTORS

     The  members of the Board of  Directors  of the  Company are elected by the
shareholders.  The  directorships of the Company are divided into three classes,
with the members of each class serving  three-year terms and the shareholders of
the Company elect one class annually.

     The  following  table and  accompanying  notes  sets  forth the name,  age,
business  experience  during  the past five  years,  the year he first  became a
director  and the year in which  his  current  term  will  expire of each of the
Directors of the Company as of December 31, 1999.
<TABLE>
<CAPTION>

                                                                                                                Director's
                                                                                                   Director        Term
                      Name                      Age                     Position                    Since         Expires
       -----------------------------------  ------------- -------------------------------------  ------------- --------------

       <S>                                       <C>      <C>                                        <C>           <C>
       Board Nominees:
          Milton G. Clements                     51       Director                                   1990          2000
          Robert L. Cation                       55       Chairman of the Board of Directors         1990          2000
          Jeffery W. Johnson                     50       Director                                   1997          2000

       Directors Continuing in Office:
          William C. Ellis, Jr.                  55       Director                                   1990          2001
          Ralph G. Evans                         43       Director                                   1990          2001
          A. Curtis Farrar, Jr.                  55       Director                                   1990          2002
          Norman E. Fletcher                     62       Director                                   1990          2002
</TABLE>

Executive Officers

     The  following  table and  accompanying  notes set forth the name,  age and
business  experience  during  the past  five  years of  individuals  who are the
executive  officers of the Company and the Bank and all persons chosen to become
executive officers.
<TABLE>
<CAPTION>

           Name                     Age                              Position with the Company and the Bank
---------------------------    --------------      ---------------------------------------------------------------------------

<S>                                 <C>            <C>
Robert L. Cation                    55             Chairman of the Board of FNC Bancorp, Inc.
                                                   Chairman of the Board of First National Bank of Coffee County

Jeffery W. Johnson                  50             President and CEO of FNC Bancorp, Inc.
                                                   President and CEO of First National Bank of Coffee County

Leonard W. Thomas                   39             Senior Vice President and CFO of First National Bank of Coffee County
                                                   Assistant Secretary of FNC Bancorp, Inc.

Ralph G. Evans                      43             Secretary of FNC Bancorp, Inc.
</TABLE>


                                      -39-
<PAGE>


Business Experience

     Effective  April 2, 1997,  Jeffery W. Johnson was employed as President and
CEO of the  Company  and the Bank as well as elected as a director  of the Bank.
Mr. Johnson has twenty-five years experience in banking. He most recently served
as President of First State Bank in Cordele, Georgia, a position he held for ten
years.  Prior to his tenure with First State Bank,  Mr. Johnson served as CEO of
Commercial State Bank,  Donalsonville,  Georgia, as a Vice President of the Bank
of Perry,  Perry,  Georgia  and as a Banking  Officer at C & S National  Bank in
Athens, Georgia. Mr. Johnson is a native of Soperton, Georgia, a graduate of the
University of Georgia and the School of Banking at Louisiana  State  University.
He has  served as a director  of the Small  Business  Administration's  Advisory
Board, is a past President of the Cordele Chamber of Commerce and was a delegate
to the 1998 Congressional Conference on Small Business.

     Leonard W. Thomas is Senior Vice  President and CFO of First  National Bank
of  Coffee  County.  His  responsibilities  include  supervision  of the  Bank's
investment,  bookkeeping and accounting operations. He has over 14 years of bank
audit and management experience, is a CPA and has completed the AICPA's National
Banking School in Charlottesville, Virginia.

     Robert L. Cation is an  Organizer of the Company and the Bank.  Mr.  Cation
also is the  Chairman  of the Board of  Directors  of the  Company and serves as
Chairman of the Board of Directors of the Bank. Since 1970, Mr. Cation has owned
and operated  Cation Food  Stores,  Inc.,  a retail  grocery  operation in south
Georgia,  where he  serves  as  President  and is  responsible  for the  overall
management of the  corporation.  Mr. Cation served as a director for Bank South,
Douglas (and as a director for The Exchange Bank of Douglas,  the predecessor of
Bank South, Douglas) from 1983 until June 1990.

     Milton G.  Clements  is an  Organizer  of the  Company  and the  Bank.  Mr.
Clements  also is a Director  of the Company  and the Bank.  He is Chairman  and
President of Clements,  Purvis & Stewart,  P.C., a Certified  Public  Accounting
firm  in  Douglas,  Georgia.  He  is  a  past  President  and  director  of  the
Douglas-Coffee  County  Chamber of  Commerce  as well as a past  director of the
Douglas Downtown Development  Authority.  Mr. Clements is a former member of the
Douglas Lions Club where he has held all the primary officer  positions and is a
current member of the Georgia Society and the American Institute of CPA's.

     William C. Ellis,  Jr. is an  Organizer  of the  Company and the Bank.  Mr.
Ellis also is a Director of the Company  and the Bank.  Mr.  Ellis has served as
President  of ESCO  Industries,  Inc.,  a Douglas  Georgia  based  manufacturing
corporation  with  branch  locations  in  Asheboro,  North  Carolina,  Lakeland,
Florida,  Waco, Texas and Hartselle,  Alabama. In addition,  Mr. Ellis serves as
President of Ellis & Ellis, Inc., Douglas,  Georgia and  Secretary-Treasurer  of
Diversified Polymer Industries,  Inc., Dalton,  Georgia. Mr. Ellis' professional
involvement includes membership in the Georgia Manufactured Housing Association,
the Coffee County Manufacturers Council and the Douglas-Coffee County Chamber of
Commerce.  From 1984 until June 1990,  he served as a director of Trust  Company
Bank of Coffee County.



                                      -40-
<PAGE>


     Ralph G. Evans is an Organizer of the Company and the Bank.  Mr. Evans also
is a Director and the  Secretary  of the Company and  Director of the Bank.  Mr.
Evans serves as President of both R. W. Griffin Feed, Seed & Fertilizer, Inc., a
farming and farm supply retail store, and Douglas Peanut and Grain Co. Mr. Evans
also  serves  as a  director  of  Chem  Nut,  Inc.,  an  Albany,  Georgia  based
publicly-held ag-chemical distribution company. Mr. Evans previously served as a
director of the Downtown Douglas Development Authority.

     A. Curtis  Farrar,  Jr. is an  Organizer  of the Company and the Bank.  Mr.
Farrar also is a Director of the Company and the Bank.  He is  presently  Senior
Partner  with the law firm of Farrar and  Hennesy.  Since 1973,  Mr.  Farrar has
served as a Juvenile  Court  Judge in  Douglas.  From 1987 to 1989,  Mr.  Farrar
served on the Georgia Governor's Task Force on Drug Awareness and Prevention.

     Norman E.  Fletcher  is an  Organizer  of the  Company  and the  Bank.  Mr.
Fletcher  also is a Director  of the Company and the Bank.  He is  President  of
Fletcher Oil Company and Floco,  Inc. all of which are wholesale oil  companies.
He also serves as President of Quick  Change,  Inc.  convenience  store chain in
south Georgia.  Mr. Fletcher is an active member and deacon of the First Baptist
Church in Douglas,  and since  January  1990,  has served as Chairman of the Job
Training Program in the area.

     Unless stated otherwise,  each of the above-named  persons has been engaged
in his or her present occupation for more than the past five years.

     There are no family relationships among directors,  executive officers,  or
persons  nominated  or chose by the  Company to become  directors  or  executive
officers.


                                      -41-
<PAGE>


ITEM 10. COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS

Executive Compensation

     The Company does not separately  compensate any of its executive  officers.
The following table sets forth the annual and long-term compensation paid to the
Company's  and the  Bank's  Chief  Executive  Officer  for the most  recent  and
previous two fiscal years. There were no other executive officers of the Company
and the Bank whose cash compensation exceeded $100,000 during 1999.
<TABLE>
<CAPTION>

                                                                                         Long-Term Compensation
                                                                           ----------------------------------------------------
                                       Annual Compensation                          Awards             Payouts
                         ------------------------------------------------- -------------------------- ----------
                                                               Other       Restricted    Securities
         Name                                                  Annual         Stock      Underlying      LTP       All Other
       Principal                    Salary       Bonus      Compensation    Award(S)      Options      Payouts   Compensation
       Position           Year        ($)         ($)         ($) (1)          ($)        SARS (#)       ($)          ($)
------------------------ -------  ------------ ----------- --------------- ------------ ------------- ---------- --------------

<S>                       <C>    <C>  <C>      <C>         <C>             <C>                <C>     <C>                 <C>
Jeffery W. Johnson (2)    1999    $   120,000  $   49,250  $            -  $         -           101  $       -  $           -
   President  and CEO     1998    $    96,000  $   24,000  $            -  $         -        10,259  $       -  $           -
   of FNC Bancorp, Inc.   1997    $    72,000  $        -  $            -  $         -        39,640  $       -  $         772
   and First National
   Bank of Coffee
   County
</TABLE>

(1)  Compensation  does not include any perquisites and other personal  benefits
which may be derived from business-related expenditures that in the aggregate do
not exceed the lesser of $50,000 or 10% of the total  annual  salary and bonuses
reported for such person.

(2) Jeffery W. Johnson began employment April 2, 1997 and was elected  President
and CEO of the Bank and the Company on May 15, 1997.




                                      -42-
<PAGE>



     The  Board of  Directors,  after  consulting  with  others  in the  banking
industry and legal counsel  negotiated an employment  agreement  with Jeffery W.
Johnson  which  commenced  on April 1, 1997 and will  continue for a term ending
April 30, 2000.  Thereafter such employment agreement will continue from year to
year unless and until  terminated by either party. The Board of Directors relied
upon  information  pertaining to comparable CEO  compensation in the industry as
well as its determination of the value of Mr. Johnson's  previous  experience in
determining a fair and  reasonable  compensation  package for Mr. Johnson as set
forth  in the  new  employment  agreement.  The  terms  and  conditions  of such
employment agreement are summarized described below.

Employment Agreement

     The employment agreement (the "Agreement") provides Mr. Johnson with a base
salary of $90,000  annually during the initial term of the Agreement.  After the
initial  fiscal year,  the base salary may be increased at the discretion of the
Board.  The Agreement  also provides for incentive  compensation  in the form of
bonuses to be paid to Mr. Johnson should certain  performance  levels related to
profitability  be achieved.  Mr.  Johnson may receive a bonus equal to fifty per
cent (50%) of the amount by which the  Company's  net income  exceeds  return on
equity benchmarks determined as set forth in the Agreement. The return on equity
benchmark for the 1997 fiscal year was 9.5%. For subsequent years, the benchmark
will be  determined  by the  Board  of  Directors  or a  compensation  committee
thereof.  These bonuses are capped at $35,000 for the first fiscal year, $45,000
for the second fiscal year and $50,000 for the third fiscal year. Mr. Johnson is
afforded  the right under the  Agreement  to elect to receive the amount of such
incentive  bonus in the form of  non-qualified  stock options  provided that the
total number of stock options issued under this election shall not exceed 25,000
shares. As an additional inducement to Mr. Johnson to accept employment with the
Bank,  the Company  issued stock options for 25,000 shares  vesting 8,333 shares
per year the first two years of employment and 8,334 in the third year. All such
stock  options will provide for a strike price of $10 per share and shall have a
term of seven years after the date of issuance or vesting, as applicable.

     The Agreement also provides for hospitalization and major medical insurance
coverage  for  Mr.  Johnson;  term  life  insurance;  disability  insurance;  an
automobile; membership in a social club suitable for conducting banking business
and reimbursement for expenses incurred on behalf of the Bank.

     The  Agreement  will provide  that,  if the Bank  terminates  the Agreement
without cause during the first three years of its term, Mr. Johnson will receive
severance  pay equal to twelve  months base salary.  In the event of a change in
control of the Bank, Mr.  Johnson will receive  severance pay equal to two years
base salary unless he is offered equivalent  employment with the acquiring party
and remains employed in such capacity for at least six months.

     In  addition,   the  employment   agreement  will  provide  that  following
termination of his employment  with the Bank, Mr. Johnson will not engage in any
banking  activities in which he was engaged at the time of his employment within
a fifty  mile  radius of  Douglas,  Georgia  for a period of one year  following
termination.




                                      -43-
<PAGE>



Other Executive Compensation

     With respect to compensation paid to executive officers other than the CEO,
the Board of Directors has offered competitive  salaries in comparison to market
practices when hiring.  Subsequent raises are based upon a comparison of current
market conditions and management's subjective valuation of job performance.  The
Bank paid bonuses to certain executive  officers.  These bonuses were based upon
an evaluation of the job  performance of each  individual  executive  officer as
well as a comparison of current market  conditions.  In addition,  the Board has
awarded  stock  options to certain  executive  officers as an  incentive  to job
performance.

Director Compensation

     Currently,  directors are  reimbursed  for expenses in connection  with the
performance  of their duties but receive no directors'  fees.  However,  for the
year ending  December  31, 2000,  the Company has budgeted to pay the  directors
$36,000 in  directors'  fees for  participation  in Board  meetings  and various
sub-committees of the Bank and Company.

     The following table sets forth certain information concerning each grant of
options to purchase the Company's  common stock made during the 1999 fiscal year
to the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>

                                                                    Individual Grants
                                      -------------------------------------------------------------------------------
                                                             % of Total
                                        Number of              Options
                                         Shares              Granted to
                                       Underlying             Employees             Exercise or
                                         Options              in Fiscal             Base Price           Expiration
                                       Granted (#)              Year                  ($/SH)                Date
                                      --------------       ----------------        --------------        ------------

       <S>                            <C>                  <C>                     <C>                      <C>
       Jeffery W. Johnson
          1999 ......................           101               2.06%            $          10            2009
                                      ==============       ================        ==============
</TABLE>

     The following table sets forth certain  information  regarding the exercise
of stock  options in the 1999  fiscal  year by the person  named in the  Summary
Compensation  Table and the Value of options  held by such  person at the end of
such fiscal year.
<TABLE>
<CAPTION>

                                Shares                          Number of Securities             Value of Unexercised
                             Acquired on      Value (1)        Underlying Unexercised            In-The-Money Options
             Name            Exercise (#)   Realized ($)      Options at Year End (#)             at Year End ($) (2)
     ---------------------  --------------- -------------- -------------------------------  --------------------------------
                                                            Exercisable    Unexercisable      Exercisable    Unexercisable
                                                           --------------- ---------------  ---------------- ---------------
     <S>                    <C>             <C>            <C>             <C>              <C>              <C>
     Jeffery W. Johnson              5,963  $      11,926          41,666           8,334   $        83,332  $       16,668
                            =============== ============== =============== ===============  ================ ===============
</TABLE>

(1) Values are  calculated  by  subtracting  the exercise or base price from the
fair market  value of the stock as of the  exercise  date or fiscal year end, as
appropriate, which is assumed to be $12 per share.

(2) Assumes,  for all unexercised  in-the-money  options, the difference between
fair  market  value and the  exercise  price to be $2 per  share for the  reason
stated in (1) above.


                                      -44-
<PAGE>


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

Principal Shareholders

     The following table presents as of December 31, 1999,  certain  information
regarding the Company's common stock owned by each person who beneficially  owns
more than 5% of the shares of the Company's common stock.
<TABLE>
<CAPTION>

                                                                                  Amount and
                                                                                  Nature of
                                           Name and Address of                    Beneficial                Percent of
          Title of Class                    Beneficial Owner                      Ownership                   Class
        --------------------        ----------------------------------        -------------------        -----------------

             <S>                    <C>                                       <C>                         <C>
              Common                Carl C. Atkinson                                   25,000  1                 6.01%
                                    Rt. 2, Box 777
                                    Broxton, Georgia 31519

              Common                Robert L. Cation                                   26,917                    6.47
                                    1008 Golf Club Road
                                    Douglas, Georgia  31533

              Common                William C. Ellis, Jr.                              27,167                    6.53
                                    Post Office Box 270
                                    Douglas, Georgia  31534

              Common                Ralph G. Evans                                     31,717 2                  7.62
                                    Post Office Box 1264
                                    Douglas, Georgia  31534

              Common                A. Curtis Farrar, Jr.                              26,917                    6.47
                                    Post Office Box 770
                                    Douglas, Georgia  31534

              Common                Norman E. Fletcher                                 26,566 3                  6.39
                                    401 Shirley Avenue
                                    Douglas, Georgia  31533
</TABLE>

1 Includes 12,500 shares held in the name of Malklean B. Atkinson,  wife of Carl
C. Atkinson.

2 Includes 600 shares held in the name of Cady Suzanne Evans,  daughter of Ralph
G. Evans, 600 shares held in the name of Christy  Elizabeth  Evans,  daughter of
Ralph G. Evans and 600 shares  held in the name of Ralph G. Evans,  Jr.,  son of
Ralph G. Evans.

3  Includes  200  shares  held in the name of CEDE &  Company  F/B/O  Norman  E.
Fletcher IRA and 200 shares held in the name of CEDE & Company  F/B/O  Marvelyne
G. Fletcher (wife of Normal E. Fletcher) IRA.



                                      -45-
<PAGE>


Stock Ownership by Management

     The following table presents as of December 31, 1999,  certain  information
regarding  the  Company's  common  stock  owned  (i) by  each  of the  Company's
directors and (ii) by all  directors and executive  officers of the Company as a
group.
<TABLE>
<CAPTION>

                                                                                  Amount and
                                                                                   Nature of
                                           Name and Address of                    Beneficial                 Percent of
          Title of Class                    Beneficial Owner                       Ownership                   Class
        --------------------        ----------------------------------        --------------------        -----------------
              <S>                   <C>                                       <C>                         <C>


              Common                Robert L. Cation                                   26,917                     6.47%
                                    1008 Golf Club Road
                                    Douglas, Georgia  31533

              Common                Milton G. Clements                                 17,600 4                   4.23
                                    1512 Golf Club Ext.
                                    Douglas, Georgia  31533

              Common                William C. Ellis, Jr.                              27,167                     6.53
                                    Post Office Box 270
                                    Douglas, Georgia  31534

              Common                Ralph G. Evans                                     31,717 5                   7.62
                                    Post Office Box 1264
                                    Douglas, Georgia  31534

              Common                A. Curtis Farrar, Jr.                              26,917                     6.47
                                    Post Office Box 770
                                    Douglas, Georgia  31534

              Common                Norman E. Fletcher                                 26,566 6                   6.39
                                    401 Shirley Avenue
                                    Douglas, Georgia  31533

              Common                Jeffery W. Johnson                                 16,925                     4.07

              Common                Leonard W. Thomas                                     467                     0.11
                                                                              ----------------            -----------------

        All directors and executive officers as a group (8 persons)                   174,276                    41.89%
                                                                              ================            =================
</TABLE>

4 Includes 1,000 shares held in the name of Laura B. Clements, wife of Milton G.
Clements,  2,000 shares held in the name of Milton Bryan Clements, son of Milton
G. Clements,  2,000 shares held in the name of Steven Griffin  Clements,  son of
Milton G. Clements,  2,000 shares held in the name of William Donovan  Clements,
son of Milton G. Clements.

5 Includes 600 shares held in the name of Cady Suzanne Evans,  daughter of Ralph
G. Evans, 600 shares held in the name of Christy  Elizabeth  Evans,  daughter of
Ralph G. Evans and 600 shares  held in the name of Ralph G. Evans,  Jr.,  son of
Ralph G. Evans.

6  Includes  200  shares  held in the name of CEDE &  Company  F/B/O  Norman  E.
Fletcher IRA and 200 shares held in the name of CEDE & Company  F/B/O  Marvalyne
G. Fletcher (wife of Norman E. Fletcher) IRA.

                                      -46-
<PAGE>


     The following  contains  information with respect to the common stock owned
as of the record date (i) by directors and executive officers of the Company and
(ii) by all directors and executive  officers of the Company as a group, who are
deemed to be the beneficial  owners of additional  shares of the common stock of
the  Company  through  their right to exercise  warrants or stock  options.  The
percent owned is calculated for each  individual  upon the assumption  that they
have  exercised all of their  warrants or stock options while no other holder of
warrants or options has done so. The  percent  owned of the group is  calculated
upon the assumption that all such individuals have simultaneously  exercised all
of their warrants and options.
<TABLE>
<CAPTION>

                                                                                                   Number of         % Owned
                                                   Number of                                      Shares and       (Including
                       Name of                       Shares       Number of       Number of        Options/         Options/
                   Beneficial Owner                 Issued 7      Warrants 8       Options        Warrants 9      Warrants) 10
       ----------------------------------------- --------------- -------------  -------------- ------------------ --------------

       <S>                                        <C>            <C>             <C>            <C>                <C>
       Robert L. Cation ........................         26,917        25,000               -             51,917      11.77%
       Milton G. Clements ......................         17,600        12,500               -             30,100       7.02
       William C. Ellis, Jr. ...................         27,167        25,000               -             52,167      11.83
       Ralph G. Evans ..........................         31,717        25,000               -             56,717      12.86
       A. Curtis Farrar, Jr. ...................         26,917        25,000               -             51,917      11.77
       Norman E. Fletcher ......................         26,566        25,000               -             51,566      11.69
       Jeffery W. Johnson ......................         16,925             -          50,000             66,925      14.36
       Leonard W. Thomas .......................            467             -             933              1,400       0.34
                                                 --------------- -------------  -------------- ------------------ --------------
          All directors and executive officers
             as a group (8 persons) ............        174,276       137,500          50,933            362,709      59.99%
                                                 =============== =============  ============== ================== ==============
</TABLE>

     Under Mr. Jeffery W. Johnson's  employment  agreement and under  agreements
with the  Bank's  directors  individually,  he  acquired  the  rights to acquire
certain stock options and stock of the Company.  If Mr. Johnson  acquired all of
the  shares of stock  available  to him by stock  option  under  his  employment
agreement or from the Bank's  directors,  then he would own 66,925 shares of the
Company's stock which would represent 14.36% of the issued and outstanding stock
of the Company  assuming  that no other holder of options or warrants  exercised
their rights to acquire additional stock.

7 Taken from the previous table except as noted.

8 In recognition of the efforts and financial risks  undertaken by the directors
and executive officers in organizing the Company and the Bank, the directors and
executive  officers  named above were granted  warrants to purchase one share of
common stock for each share purchased in the original  offering,  however,  such
persons elected to acquire a total of only 137,500 such warrants. Upon exercise,
each  warrant  will entitle the holder to purchase one share of the common stock
of the  company  at a price  equal to $10 per share (the same price at which the
shares  were  initially  sold to the  public)  unless the Bank is, at that time,
required to raise  capital to meet its  regulatory  guidelines in which case the
exercise  price  will be greater of $10 per share or the book value per share of
the  common  stock  of the  Company  as  reflected  in the  Company's  quarterly
financial  report for the quarter and  immediately  prior to the exercise of the
warrant.  Subject to certain  limitations,  the warrants are  exercisable  for a
period of ten (10) years from the date of the Company's stock offering.

9 Includes shares deemed to be beneficially  owned through the right to exercise
warrants or stock options exercisable within sixty (60) days of the record date.

10 Based upon 416,136  shares  outstanding as of the record date and as adjusted
for warrants or stock options  exercisable  within sixty (60) days of the record
date.


                                      -47-
<PAGE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Bank Loans to Affiliates

     The Directors,  officers and employees of the Company and the Bank, as well
as individuals,  firms and companies with which they are associated, have or are
anticipated to have banking  transactions  with the Bank.  Subject to applicable
laws, the Bank has a policy of offering loans to its eligible  employees  (i.e.,
employees other than Directors,  executive officers and holders of more than ten
percent of the Company's outstanding Common Stock, as well as affiliates of such
persons) at  favorable  interest  rates which  generally  will be equal to or in
excess  of the  Bank's  prime  lending  rate at the time of the  loan.  Loans to
directors, executive officers, controlling shareholders and their affiliates are
made at the  prevailing  interest  rate for  comparable  loans  to  unaffiliated
borrowers.  In all respects other than the rate of interest  charged on loans to
eligible  employees,  loans by the Bank to  directors,  officers,  employees and
controlling shareholders, as well as to affiliates of such persons, are extended
only in the  ordinary  course of business and on  substantially  the same terms,
including   collateral,   as  those   prevailing  at  the  time  for  comparable
transactions with unrelated persons and do not involve more than the normal risk
of  collectability  or present  other  unfavorable  features.  Bank  policy also
requires  that  any  loans  by the  Bank to any of its  directors  or  executive
officers  aggregating  in excess of $25,000 must be approved by the  affirmative
vote of a  majority  of the  Board  of  Directors  at a  meeting  in  which  any
interested  director  has  abstained  from  participating,  either  directly  or
indirectly.





                                      -48-
<PAGE>

PART IV

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits required by Item 601 of Regulation S-B.

Exhibit
   No.                             Description

  3.1    Articles of Incorporation of the Registrant,  (filed as Exhibit 3.1 to
         the Registrant's Form S-18 (File Number  33-37078), as amended.)

  3.2    Bylaws of the Registrant (filed as Exhibit 3.2 to the Registrant's Form
         S-18 (File Number 33-37078), as amended.)

  10.1   Form of subscription Agreement (filed as Exhibit 10.1 to the
         Registrant's Annual Report on Form 10-KSB (File Number 33-37078),
         filed with the Commission for the year ended December 31, 1990 and
         incorporated herein by reference.)

  10.2   Form of Organizer's Warrant  (filed as Exhibit 10.2 to the Registrant's
         Form S-18 (File Number 33-37078), as amended.)

  10.3   1997 Incentive Stock Option Plan (filed as Exhibit 10.3 to the
         Registrant's Annual Report on Form 10-KSB (File Number 33-37078),
         filed with the Commission for the year ended December 31, 1997 and
         incorporated herein by reference).

  10.4   Executive Employment Agreement with Jeffery W. Johnson (filed as
         Exhibit 10.4 to the Registrant's Annual Report on Form 10-KSB (File
         Number 33-37078), filed with the Commission for the year ended
         December 31, 1997 and incorporated herein by reference).

  21.1   Subsidiaries of the Registrant. (filed as Exhibit 21.1 to the
         Registrant's Annual Report on Form 10-KSB (File Number 33-37078),
         (filed with the Commission for the year ended December 31, 1996 and
         incorporated herein by reference).

  24     Power of Attorney relating to this Annual Report on Form 10-KSB is set
         forth on the signature pages to this Annual Report.

  27     Financial Data Schedule

(b) The  Registrant did not file any reports on Form 8-K during the last quarter
of the period covered by this Report.

                                      -49-
<PAGE>

                                   SIGNATURES

     Pursuant  to the  requirement  of  Section  13 or 15(d)  of the  Securities
Exchange Act of 1934 (the "Exchange  Act"),  the Registrant has duly caused this
Form  10-KSB to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.

                                    FNC BANCORP, INC.

Date:March 24, 2000                By: /s/ Jeffrey W. Johnson
     -------------------------     --------------------------------------------
                                   Jeffery W. Johnson, President,
                                   Chief Executive Officer and Director


                                POWER OF ATTORNEY

     KNOWN ALL MEN BY THESE PRESENTS,  that each person whose signature  appears
below  constitutes  and  appoints  Jeffery W.  Johnson as his  attorney-in-fact,
acting with full power of substitution  for him in his name, place and stead, in
any and all  capacities,  to sign any amendments to this Form 10-KSB and to file
the  same,  with  exhibits  thereto,  and  any  other  documents  in  connection
therewith,  with the Securities and Exchange  Commission and hereby ratifies and
confirms all that said attorney-in-fact,  or his substitute or substitutes,  may
do or cause to be done by virtue thereof.

     Pursuant to the requirements of the Exchange Act, this Form 10-KSB has been
signed by the following persons in the capacities and on the dates indicated.

Date:March 24, 2000                /s/ Jeffrey W. Johnson
     -------------------------     --------------------------------------------
                                   Jeffery W. Johnson, President
                                   Chief Executive Officer and Director

Date:March 24, 2000                /s/ Robert L. Cation
     -------------------------     --------------------------------------------
                                   Robert L. Cation, Director

Date:March 24, 2000                /s/ Milton G. Clements
     -------------------------     --------------------------------------------
                                   Milton G. Clements, Director

Date:March 24, 2000                /s/ William C. Ellis, Jr.
     -------------------------     --------------------------------------------
                                   William C. Ellis, Jr., Director

Date:March 24, 2000                /s/ Ralph G. Evans
     -------------------------     --------------------------------------------
                                   Ralph G. Evans, Director

Date:March 24, 2000                /s/ A. Curtis Farrar, Jr.
     -------------------------     --------------------------------------------
                                    A. Curtis Farrar, Jr., Director

Date:March 24, 2000                /s/ Norman E. Fletcher
     -------------------------     --------------------------------------------
                                   Norman E. Fletcher, Director


                                      -50-
<PAGE>

                                FNC BANCORP, INC.

                                  EXHIBIT INDEX
Exhibit
   No.                             Description

  3.1    Articles of Incorporation of the Registrant,  (filed as Exhibit 3.1 t
         the Registrant's Form S-18 (File Number  33-37078), as amended.)

  3.2    Bylaws of the Registrant (filed as Exhibit 3.2 to the Registrant's Form
         S-18 (File Number 33-37078), as amended.)

  10.1   Form of subscription Agreement (filed as Exhibit 10.1 to the
         Registrant's Annual Report on Form 10-KSB (File Number 33-37078),
         filed with the Commission for the year ended December 31, 1990 and
         incorporated herein by reference.)

  10.2   Form of Organizer's Warrant  (filed as Exhibit 10.2 to the Registrant's
         Form S-18 (File Number 33-37078), as amended.)

  10.3   1997 Incentive Stock Option Plan (filed as Exhibit 10.3 to the
         Registrant's Annual Report on Form 10-KSB (File Number 33-37078),
         (filed with the Commission for the year ended December 31, 1997 and
         incorporated herein by reference).

  10.4   Executive Employment Agreement with Jeffery W. Johnson (filed as
         Exhibit 10.4 to the Registrant's Annual Report on Form 10-KSB (File
         Number 33-37078), (filed with the Commission for the year ended
         December 31, 1997 and incorporated herein by reference).

  21.1   Subsidiaries of the Registrant. (filed as Exhibit 21.1 to the
         Registrant's Annual Report on Form 10-KSB (File Number 33-37078),
         (filed with the Commission for the year ended December 31, 1996 and
         incorporated herein by reference.)

  24     Power of Attorney relating to this Annual Report on Form 10-KSB is set
         forth on the signature pages to this Annual Report.

  27     Financial Data Schedule

(b) The  Registrant did not file any reports on Form 8-K during the last quarter
of the period covered by this Report.


                                      -51-

<PAGE>




                               FNC BANCCORP, INC.

                   INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
<TABLE>
<CAPTION>

                                                                                                Page
                                                                                                ----
<S>                                                                                             <C>
Consolidated financial statements:
 Independent Auditor's Report ................................................................. F-2
 Consolidated Balance Sheets - December 31, 1999 and 1998 ..................................... F-3
 Consolidated Statements of Income - Years ended December 31, 1999 and 1998 ................... F-4
 Consolidated  Statements of Comprehensive Income - Years ended December 31, 1999 and 1998 .... F-5
 Consolidated  Statements of Stockholders' Equity - Years ended December 31, 1999 and 1998 .... F-6
 Consolidated Statements of Cash Flows - Years ended December 31, 1999 and 1998 ............... F-7
 Notes to Consolidated Financial Statements ................................................... F-9
</TABLE>

All schedules are omitted as the required  information  is  inapplicable  or the
information is presented in the financial statements or related notes.




                                      F-1
<PAGE>











                          INDEPENDENT AUDITOR'S REPORT




To the Board of Directors
FNC Bancorp, Inc. and Subsidiary
Douglas, Georgia


     We  have  audited  the  accompanying  consolidated  balance  sheets  of FNC
Bancorp,  Inc. and  Subsidiary  as of December 31, 1999 and 1998 and the related
consolidated  statements of income,  comprehensive income,  stockholders' equity
and cash flows for the years then  ended.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects, the financial position of FNC Bancorp,
Inc. and  Subsidiary as of December 31, 1999 and 1998,  and the results of their
operations  and their cash flows for the years then ended,  in  conformity  with
generally accepted accounting principles.






Albany, Georgia
January 28, 2000                        /s/ MAULDIN & JENKINS, LLC

                                      F-2
<PAGE>


                                FNC BANCORP, INC.
                                 AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>


                                    Assets                                               1999                     1998
                                    ------
                                                                               ---------------------    ---------------------
<S>                                                                            <C>                       <C>
Cash and due from banks ...................................................... $          3,394,212      $         5,617,359
Federal funds sold ...........................................................            1,528,000                5,966,000
Securities available for sale, at fair value .................................            3,165,290                4,280,362
Securities held to maturity, at cost
     (fair value $4,728,603) .................................................            4,777,413                        -
Other investments ............................................................              313,900                  473,600

Loans ........................................................................           54,168,453               41,989,950
Less allowance for loan losses ...............................................            1,422,689                1,274,285
                                                                               ---------------------    ---------------------
          Loans, net .........................................................           52,745,764               40,715,665
                                                                               ---------------------    ---------------------

Premises and equipment, net ..................................................            1,849,122                1,613,025
Other assets .................................................................            1,079,603                  914,391
                                                                               ---------------------    ---------------------

                                                                                 $       68,853,304      $        59,580,402
                                                                               =====================    =====================

                     Liabilities and Stockholders' Equity

Deposits

    Noninterest-bearing demand ............................................... $         11,090,409      $        12,695,085
    Interest-bearing demand ..................................................           13,136,785               11,707,125
    Savings ..................................................................            1,999,607                1,973,434
    Time, $100,000 and over ..................................................           10,724,505                9,252,893
    Other time ...............................................................           23,923,115               18,671,816
                                                                               ---------------------    ---------------------
              Total deposits .................................................           60,874,421               54,300,353
                                                                               ---------------------    ---------------------
    Federal funds purchased ..................................................            1,250,000                        -
    Notes payable, directors .................................................              500,000                  500,000
    Federal Home Loan Bank borrowings ........................................               55,000                   65,000
    Other liabilities ........................................................            1,322,291                  771,509
                                                                               ---------------------    ---------------------
          Total liabilities ..................................................           64,001,712               55,636,862
                                                                               ---------------------    ---------------------


Stockholders' equity

    Preferred stock, par value $1; 10,000,000 shares
        authorized, no shares issued
    Common stock, par value $1; 10,000,000 shares
        authorized; issued 1999 416,636 shares;
        1998 411,173 shares ..................................................              416,636                  411,173
    Additional paid-in capital ...............................................            3,708,875                3,659,708
    Retained earnings (deficit) ..............................................              784,081                 (141,341)
    Accumulated other comprehensive income (loss) ............................              (49,000)                  14,000
                                                                               ---------------------    ---------------------
                                                                                          4,860,592                3,943,540
    Less cost of treasury stock, 500 shares ..................................                9,000                        -
                                                                               ---------------------    ---------------------
          Total stockholders' equity .........................................            4,851,592                3,943,540
                                                                               ---------------------    ---------------------

                                                                                 $       68,853,304      $        59,580,402
                                                                               =====================    =====================
</TABLE>

See Notes to Consolidated Financial Statements.






                                      F-3
<PAGE>


                                FNC BANCORP, INC.
                                 AND SUBSIDIARY
                        CONSOLIDATED STATEMENTS OF INCOME
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>


                                                                                          1999                      1998
                                                                                   -------------------   ----------------------
<S>                                                                                <C>                     <C>
Interest income
    Interest and fees on loans ................................................... $        4,708,709      $         3,614,790
    Interest and dividends on taxable securities .................................            389,393                  290,683
    Interest on nontaxable securities ............................................              3,586                        -
    Interest on Federal funds sold ...............................................            230,641                  206,364
                                                                                   -------------------   ----------------------
                                                                                            5,332,329                4,111,837
                                                                                   -------------------   ----------------------

Interest expense
    Interest on deposits .........................................................          2,200,033                1,713,903
    Interest on other borrowings .................................................             40,984                   59,358
                                                                                   -------------------   ----------------------
                                                                                            2,241,017                1,773,261
                                                                                   -------------------   ----------------------

          Net interest income ....................................................          3,091,312                2,338,576
Provision for loan losses ........................................................                  -                        -
                                                                                   -------------------   ----------------------
          Net interest income after provision for loan losses ....................          3,091,312                2,338,576
                                                                                   -------------------   ----------------------

Other income
    Service charges on deposit accounts ..........................................            524,040                  446,728
    Other commissions and fees ...................................................             36,507                   26,545
    Origination fees on mortgage loans ...........................................             34,308                   45,851
    Other ........................................................................             75,364                   70,204
                                                                                   -------------------   ----------------------
                                                                                              670,219                  589,328
                                                                                   -------------------   ----------------------

Other expenses
    Salaries and employee benefits ...............................................          1,250,855                  991,981
    Equipment and occupancy ......................................................            279,188                  261,306
    Data processing ..............................................................             89,226                  106,459
    Printing and office supplies .................................................             71,512                   67,138
    Legal and professional .......................................................             80,454                  101,313
    Advertising and business development .........................................             67,501                   40,259
    Training and travel ..........................................................            148,226                   77,742
    Other operating expenses .....................................................            334,177                  335,417
                                                                                   -------------------   ----------------------
                                                                                            2,321,139                1,981,615
                                                                                   -------------------   ----------------------

          Income before income taxes .............................................          1,440,392                  946,289

Income tax expense ...............................................................            514,970                  344,611
                                                                                   -------------------   ----------------------

          Net income ............................................................. $          925,422      $           601,678
                                                                                   ===================   ======================

Basic earnings per common share .................................................. $             2.23      $              1.47
                                                                                   ===================   ======================

Diluted earnings per common share ................................................ $             2.07      $              1.47
                                                                                   ===================   ======================
</TABLE>

See Notes to Consolidated Financial Statements.








                                      F-4
<PAGE>

                                FNC BANCORP, INC.
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                     YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>

                                                                                          1999                     1998
                                                                                   -------------------   --------------------

<S>                                                                                <C>                     <C>
Net income ....................................................................... $          925,422      $         601,678

Other comprehensive income (loss):

    Net unrealized holding gains (losses) arising during
        period, net of tax (benefit) of ($32,000) and $1,866 .....................            (63,000)                 4,034
                                                                                   -------------------   --------------------

Comprehensive income ............................................................. $          862,422      $         605,712
                                                                                   ===================   ====================

</TABLE>

See Notes to Consolidated Financial Statements.







                                      F-5
<PAGE>

                                FNC BANCORP, INC.
                                 AND SUBSIDIARY
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>



                                                                               Accumulated
                                                                                  Other
                                       Common Stock      Additional   Retained Comprehensive   Treasury Stock        Total
                                     -----------------    Paid-in     Earnings    Income      ----------------   Stockholders'
                                      Shares Par Value    Capital    (Deficit)    (Loss)      Shares Par Value      Equity
                                     ------- ---------  -----------  ---------  ------------  ------ ---------  ---------------

<S>                                  <C>     <C>        <C>          <C>        <C>           <C>    <C>        <C>
Balance, December 31, 1997 ......... 405,710 $ 405,710  $ 3,610,541  $(743,019) $      9,966       - $       -  $     3,283,198
    Exercise of options by
        officer ....................   5,463     5,463       49,167          -             -       -         -           54,630
    Net income .....................       -         -            -    601,678             -       -         -          601,678
    Other comprehensive income .....       -         -            -          -         4,034       -         -            4,034
                                     ------- ---------  -----------  ---------  ------------  ------ --------- ----------------
Balance, December 31, 1998 ......... 411,173   411,173    3,659,708   (141,341)       14,000       -         -        3,943,540
    Exercise of options by
        officer ....................   5,463     5,463       49,167          -             -       -         -           54,630
    Net income .....................       -         -            -    925,422             -       -         -          925,422
    Purchase of treasury stock .....       -         -            -          -             -     500    (9,000)          (9,000)
    Other comprehensive loss .......       -         -            -          -       (63,000)      -         -          (63,000)
                                     ------- --------  ------------  ---------  ------------  ------ --------- ----------------
Balance, December 31, 1999 ......... 416,636 $ 416,636  $ 3,708,875  $ 784,081  $    (49,000)    500 $  (9,000)   $   4,851,592
                                     ======= ========= ============  =========  ============  ====== ========= ================
</TABLE>

See Notes to Consolidated Financial Statements.






                                      F-6
<PAGE>


                                FNC BANCORP, INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>


                                                                                           1999                         1998
                                                                                   ----------------------    -----------------------
<S>                                                                                <C>                        <C>
OPERATING ACTIVITIES

    Net income ................................................................... $             925,422      $             601,678
                                                                                   ----------------------    -----------------------
    Adjustments  to  reconcile  net  income to net cash  provided  by  operating
        activities:

        Depreciation .............................................................               141,167                    133,926
        Provision for deferred income taxes ......................................                10,691                    173,529
        Loss on disposal of property and equipment ...............................                14,790                          -
        Increase in interest receivable ..........................................              (150,434)                   (28,792)
        Increase in interest payable .............................................               149,382                    189,052
        Increase in taxes payable ................................................               315,629                          -
        Other prepaids, deferrals and accruals, net ..............................                92,302                    224,034
                                                                                   ----------------------    -----------------------
              Total adjustments ..................................................               573,527                    691,749
                                                                                   ----------------------    -----------------------

              Net cash provided by operating activities ..........................             1,498,949                  1,293,427
                                                                                   ----------------------    -----------------------

INVESTING ACTIVITIES

    (Increase) decrease in Federal funds sold ....................................             4,438,000                 (5,932,000)
    Purchases of securities available for sale ...................................            (2,979,928)                (1,750,000)
    Proceeds from sales of securities available for sale .........................             1,000,000                          -
    Proceeds from maturities of securities available for sale ....................             3,000,000                  3,501,360
    Purchases of securities held to maturity .....................................            (4,777,413)                         -
    Proceeds from redemption of
        Federal Home Loan Bank stock .............................................               159,700                          -
    Increase in loans, net .......................................................           (12,030,099)               (10,195,091)
    Purchase of premises and equipment ...........................................              (392,054)                   (91,921)
                                                                                   ----------------------    -----------------------

              Net cash used in investing activities ..............................           (11,581,794)               (14,467,652)
                                                                                   ----------------------    -----------------------

FINANCING ACTIVITIES

    Increase in deposits .........................................................             6,574,068                 15,252,354
    Increase (decrease) in Federal funds purchased ...............................             1,250,000                   (430,000)
    Decrease in Federal Home Loan Bank borrowings ................................               (10,000)                (1,010,000)
    Proceeds from issuance of common stock .......................................                54,630                     54,630
    Purchase of treasury stock ...................................................                (9,000)                         -
                                                                                   ----------------------    -----------------------

              Net cash provided by financing activities ..........................             7,859,698                 13,866,984
                                                                                   ----------------------    -----------------------

Net increase (decrease) in cash and due from banks ............................... $          (2,223,147)     $             692,759

Cash and due from banks at beginning of year .....................................             5,617,359                  4,924,600
                                                                                   ----------------------    -----------------------

Cash and due from banks at end of year ........................................... $           3,394,212      $           5,617,359
                                                                                   ======================    =======================

</TABLE>





                                      F-7
<PAGE>

                                FNC BANCORP, INC.
                                 AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>


                                                                                         1999                       1998
                                                                                 ---------------------     -------------------


<S>                                                                              <C>                       <C>
SUPPLEMENTAL DISCLOSURES Cash paid during the year for:

        Interest ..............................................................  $          2,091,635      $         1,584,209

        Income taxes ..........................................................  $            188,650      $           171,082

NONCASH TRANSACTION

    Net change in unrealized gains (losses) on securities
        available for sale ....................................................  $            (95,000)     $             5,900

</TABLE>

See Notes to Consolidated Financial Statements.





                                      F-8
<PAGE>


                                FNC BANCORP, INC.
                                 AND SUBSIDIARY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

FNC Bancorp,  Inc.  (the Company) is a bank holding  company  whose  business is
conducted by its wholly-owned  subsidiary,  First National Bank of Coffee County
(the Bank).  The Bank is a commercial  bank located in Douglas,  Coffee  County,
Georgia.  The Bank  provides  a full range of banking  services  in its  primary
market area of Coffee County and the surrounding counties.

Basis of Presentation

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities  and  disclosures  of
contingent  assets and  liabilities  as of the balance  sheet date and  reported
amounts of revenues and expenses  during the reporting  period.  Actual  results
could differ from those  estimates.  Material  estimates  that are  particularly
susceptible to significant  change in the near term relate to the  determination
of the allowance for loan losses,  the valuation of foreclosed real estate,  and
deferred tax assets.

The  Company's  consolidated  financial  statements  include the accounts of the
Company and the Bank. All  significant  intercompany  transactions  and accounts
have been eliminated in consolidation.

Reclassification of Certain Items

Certain items in the  consolidated  financial  statements as of and for the year
ended December 31, 1998 have been reclassified,  with no effect on total assets,
total capital or net income, to be consistent with the  classifications  adopted
for the year ended December 31, 1999.



                                      F-9
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Cash and Due From Banks

Cash on hand,  cash items in process of  collection,  and amounts due from banks
are included in cash and due from banks.

The  Company  maintains  amounts  due from  banks  which,  at times,  may exceed
Federally  insured  limits.  The Company has not  experienced any losses in such
accounts.

Securities

Securities  are  classified  based  on  management's  intention  on the  date of
purchase.  Securities  which  management  has the intent and  ability to hold to
maturity are  classified  as held to maturity  and  recorded at amortized  cost.
Securities  not  classified as held to maturity are  classified as available for
sale and recorded at fair value with  unrealized  gains and losses reported as a
separate  component of other  comprehensive  income or loss. Other  investments,
which include Federal  Reserve Bank stock and Federal Home Loan Bank stock,  are
carried at cost as such investments are not readily marketable.

Interest and dividends on  securities,  including  amortization  of premiums and
accretion of  discounts,  are included in interest  income.  Realized  gains and
losses  from  the  sale  of  securities  are   determined   using  the  specific
identification method.

Loans

Loans are reported at their outstanding  principal balances less unearned income
and the  allowance  for loan  losses.  Interest  income is accrued  based on the
principal balance outstanding.

Fees on loans and costs  incurred in  origination of loans are recognized at the
time the loan is placed on the books.  Because these loan fees and costs are not
significant  and the majority of loans have  maturities of one year or less, the
results of operations are not materially  different than the results which would
be obtained by accounting  for loan fees and costs in accordance  with generally
accepted accounting principles.



                                      F-10
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Loans (Continued)

The accrual of interest on loans is discontinued when, in management's  opinion,
the  borrower  may be unable to meet  payments as they become  due.  Unless,  in
management's opinion, the borrower's impairment is only temporary,  all interest
accrued  but not  collected  for loans that are placed on  nonaccrual  status or
charged off is reversed against interest income. Interest income is subsequently
recognized only to the extent cash payments are received.

The allowance for loan losses is maintained at a level that management  believes
to be adequate to absorb potential losses in the loan portfolio. Loan losses are
charged against the allowance when management believes the uncollectibility of a
loan  is  confirmed.  Subsequent  recoveries  are  credited  to  the  allowance.
Management's  determination  of the  adequacy  of the  allowance  is based on an
evaluation  of the  portfolio,  past  loan  loss  experience,  current  economic
conditions,  volume, growth,  composition of the loan portfolio, and other risks
inherent in the  portfolio.  This  evaluation  is  inherently  subjective  as it
requires material estimates that are susceptible to significant change including
the amounts and timing of future cash flows  expected to be received on impaired
loans.  In  addition,   regulatory  agencies,  as  an  integral  part  of  their
examination  process,  periodically  review  the  Company's  allowance  for loan
losses,  and may require the Company to record  additions to the allowance based
on  their  judgment  about  information  available  to them at the time of their
examinations.

A loan is considered  impaired when it is probable the Company will be unable to
collect  all  principal  and  interest  payments  due  in  accordance  with  the
contractual terms of the loan agreement.  Individually identified impaired loans
are  measured  based  on the  present  value  of  expected  payments  using  the
contractual loan rate as the discount rate, the loan's  observable market price,
or the fair value of the collateral if the loan is collateral dependent.  If the
recorded  investment in the impaired  loan exceeds the measure of fair value,  a
valuation  allowance is  established  as a component of the  allowance  for loan
losses.  Changes to the  valuation  allowance are recorded as a component of the
provision for loan losses.



                                      F-11
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Premises and Equipment

Land is  carried  at cost.  Premises  and  equipment  are  carried  at cost less
accumulated  depreciation  computed principally on the straight-line method over
the estimated useful lives of the assets.

Other Real Estate Owned

Other real estate owned  represents  properties  acquired  through  foreclosure.
Other  real  estate  owned is held for sale and is  carried  at the lower of the
recorded  amount  of the loan or fair  value of the  properties  less  estimated
selling  costs.  Any  write-down  to fair value at the time of transfer to other
real estate owned is charged to the allowance for loan losses.  Subsequent gains
or losses on sale and any  subsequent  adjustment  to the value are  recorded as
other  expenses.  There was no other real estate  owned at December  31, 1999 or
1998.

Income Taxes

Income tax expense  consists of current and deferred  taxes.  Current income tax
provisions  approximate  taxes to be paid or refunded for the  applicable  year.
Deferred  income tax assets and  liabilities  are  determined  using the balance
sheet  method.  Under this  method,  the net  deferred tax asset or liability is
determined based on the tax effects of the differences  between the book and tax
bases of the various  balance  sheet assets and  liabilities  and gives  current
recognition  to  changes  in tax rates and laws.  Recognition  of  deferred  tax
balance  sheet  amounts is based on  management's  belief that it is more likely
than not that the tax benefit associated with certain temporary differences will
be realized.  A valuation  allowance  would be recorded  for those  deferred tax
items for which it is more likely than not that realization would not occur. The
Company files a consolidated  income tax return. Each entity provides for income
taxes based on its  contribution to income taxes  (benefits) of the consolidated
group.



                                      F-12
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Common Share

Basic  earnings  per common  share are  computed by  dividing  net income by the
weighted average number of shares of common stock outstanding.  Diluted earnings
per common share are computed by dividing net income minus the income  effect of
potential  common  shares that are dilutive by the sum of the  weighted  average
number of shares of common stock outstanding and potential common shares.

Comprehensive Income

Statement  of  Financial   Accounting   Standards  ("SFAS")  No.  130  describes
comprehensive  income as the total of all  components of  comprehensive  income,
including net income. Other comprehensive  income refers to revenues,  expenses,
gains and  losses  that  under  generally  accepted  accounting  principles  are
included in comprehensive  income but excluded from net income.  Currently,  the
Company's other comprehensive  income consists of unrealized gains and losses on
available for sale securities.

Recent Accounting Pronouncements

In June 1998,  the  Financial  Accounting  Standards  Board issued SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging  Activities".  The effective
date of this  statement  has been  deferred by SFAS No. 137 until  fiscal  years
beginning after June 15, 2000. However,  the statement permits early adoption as
of the beginning of any fiscal quarter after its issuance.  The Company  expects
to adopt this  statement  effective  January 1, 2001.  SFAS No. 133 requires the
Company to recognize  all  derivatives  as either assets or  liabilities  in the
balance sheet at fair value.  For derivatives that are not designated as hedges,
the gain or loss must be  recognized  in earnings  in the period of change.  For
derivatives  that are  designated  as  hedges,  changes in the fair value of the
hedged assets,  liabilities,  or firm commitments must be recognized in earnings
or recognized in other comprehensive  income until the hedged item is recognized
in earnings,  depending on the nature of the hedge. The ineffective portion of a
derivative's  change in fair value must be recognized  in earnings  immediately.
Management has not yet determined  what effect the adoption of SFAS No. 133 will
have on the Company's earnings or financial position.

There are no other  recent  accounting  pronouncements  that  have  had,  or are
expected to have, a material effect on the Company's financial statements.



                                      F-13
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 2.  INVESTMENT SECURITIES

The amortized cost and  approximate  fair values of securities are summarized as
follows:
<TABLE>
<CAPTION>

                                                                                     Gross          Gross
                                                                   Amortized      Unrealized      Unrealized         Fair
                                                                      Cost           Gains          Losses          Value
                                                                 --------------- -------------- --------------- ---------------

                   <S>                                           <C>             <C>            <C>             <C>
                   Securities Available for Sale
                      December 31, 1999:
                      U. S. Treasury and government agencies ... $    3,239,290  $           -  $     (74,000)  $    3,165,290
                                                                 =============== ============== =============== ===============

                      December 31, 1998:
                      U. S. Treasury and government agencies ... $    4,259,362  $     21,000   $           -   $    4,280,362
                                                                 =============== =============  ==============  ===============

                  Securities Held to Maturity
                     December 31, 1999:
                     U. S. Treasury and government agencies .... $    4,482,594  $          -   $    (46,188)   $    4,436,406
                     State, county and municipal securities ....        294,819             -         (2,622)          292,197
                                                                 --------------- -------------  --------------  ---------------

                                                                 $    4,777,413  $          -   $    (48,810)   $    4,728,603
                                                                 =============== =============  ==============  ===============
</TABLE>

Securities  with a carrying  value of $4,722,586  and $2,824,141 at December 31,
1999 and 1998,  respectively,  were  pledged to secure  public  deposits and for
other purposes.

The amortized cost and fair value of debt  securities as of December 31, 1999 by
contractual maturity are shown below.
<TABLE>
<CAPTION>

                                                            Securities Available for Sale       Securities Held to Maturity
                                                          ---------------------------------- ----------------------------------
                                                            Amortized            Fair           Amortized           Fair
                                                               Cost             Value             Cost              Value
                                                          ---------------  ----------------- ----------------  ----------------

                       <S>                                <C>              <C>               <C>               <C>
                       Due from one to three years ...... $    2,249,780   $      2,195,817  $     3,141,921   $     3,119,366
                       Due from three to five years .....        989,510            969,473        1,585,665         1,561,885
                       Due from five to ten years .......              -                  -           49,827            47,352
                                                          ---------------  ----------------- ----------------  ----------------
                                                          $    3,239,290   $      3,165,290  $     4,777,413   $     4,728,603
                                                          ===============  ================= ================  ================

</TABLE>


                                      F-14
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES

The composition of loans is summarized as follows:
<TABLE>
<CAPTION>

                                                                                                 December 31,
                                                                                     --------------------------------------
                                                                                            1999                 1998
                                                                                     -----------------    ----------------
                     <S>                                                             <C>                  <C>
                     Commercial and financial ...................................... $       8,015,067    $      6,344,841
                     Agricultural ..................................................         1,431,012           1,213,970
                     Real estate - construction ....................................         2,545,021           1,209,970
                     Real estate - mortgage, farmland ..............................         8,419,070           7,915,802
                     Real estate - mortgage, other .................................        27,847,233          21,156,471
                     Consumer installment ..........................................         5,911,050           4,148,896
                                                                                     ------------------   -----------------

                                                                                            54,168,453          41,989,950
                     Allowance for loan losses .....................................       (1,422,689)         (1,274,285)
                                                                                     ------------------   -----------------

                     Loans, net .................................................... $      52,745,764    $     40,715,665
                                                                                     ==================   =================
</TABLE>

Changes in the allowance for loan losses are as follows:
<TABLE>
<CAPTION>

                                                                                          Years Ended December 31,
                                                                                  ------------------------------------------
                                                                                          1999                   1998
                                                                                  -------------------    -------------------

                      <S>                                                         <C>                    <C>
                      Balance, beginning of year ................................ $        1,274,285     $        1,159,173
                         Provision for loan losses ..............................                  -                      -
                         Loans charged off ......................................            (63,359)              (135,693)
                         Recoveries of loans previously charged off .............            211,763                250,805
                                                                                  -------------------    -------------------
                      Balance, end of year ...................................... $        1,422,689     $        1,274,285
                                                                                  ===================    ===================
</TABLE>

The Bank had no loans which it considered to be impaired other than the loans on
which  the  accrual  of  interest  had been  discontinued.  The  total  recorded
investment in impaired  loans was $380,425 and $332,587 at December 31, 1999 and
1998,  respectively.  These  loans  had  related  allowance  for loan  losses of
approximately  $67,000 and $69,000 at December 31, 1999 and 1998,  respectively.
The  average  recorded  investment  in  impaired  loans  for  1999  and 1998 was
approximately  $403,000 and  $569,000,  respectively.  There was no  significant
amount of interest income recognized on impaired loans in 1999 or 1998.



                                      F-15
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






NOTE 3.  LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)

The Bank has granted  loans to certain  related  parties,  including  directors,
executive officers and their related entities. The interest rates on these loans
were  substantially  the same as rates prevailing at the time of the transaction
and  repayment  terms are customary  for the type of loan  involved.  Changes in
related party loans for the year ended December 31, 1999 are as follows:
<TABLE>

                         <S>                                                                            <C>
                         Balance, beginning of year ................................................... $        175,228
                            Advances ..................................................................          622,207
                            Repayments ................................................................        (201,556)
                                                                                                        -----------------
                            Balance, end of year ...................................................... $        595,879
                                                                                                        =================
</TABLE>


NOTE 4.  PREMISES AND EQUIPMENT, NET

Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>

                                                                                                   December 31,
                                                                                       --------------------------------------
                                                                                              1999                 1998
                                                                                       -----------------    -----------------

                      <S>                                                              <C>                  <C>
                      Land ........................................................... $        372,676     $        372,676
                      Buildings and improvements .....................................        1,064,078            1,064,078
                      Equipment ......................................................        1,006,375              882,757
                      Construction in process, estimated cost
                            to complete; $575,000 ....................................          240,386                    -
                                                                                       -----------------    -----------------
                                                                                              2,683,515            2,319,511
                      Accumulated depreciation .......................................        (834,393)            (706,486)
                                                                                       -----------------    -----------------
                                                                                       $      1,849,122     $      1,613,025
                                                                                       =================    =================
</TABLE>



                                      F-16
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






Note 5.  DEPOSITS

At December 31, 1999, scheduled maturities of time deposits are as follows:
<TABLE>

                      <S>                                                                                  <C>
                      For the year ending December 31,
                         2000 ............................................................................ $     29,084,483
                         2001 ............................................................................        1,959,047
                         2002 ............................................................................        2,859,112
                         2003 ............................................................................          724,433
                         2004 ............................................................................            7,700
                         Due after five years ............................................................           12,845
                                                                                                           -----------------
                                                                                                           $     34,647,620
                                                                                                           =================
</TABLE>


NOTE 6.  NOTES PAYABLE TO DIRECTORS

Notes payable to certain directors totaling $500,000 consist of notes which were
executed on December 27, 1996, and subsequently  modified on July 10, 1999. Each
of the notes  accrues  interest  at the  Bank's  prime  rate  less 1%.  With the
exception  of one note in the amount of $36,750 to one director  where  interest
payments are due quarterly,  all payments of principal and accrued interest have
been deferred until maturity on December 29, 2001. At maturity,  the Company has
the option to pay all or a part of unpaid  principal  and interest by issuing to
the director any stock  subject to  unexercised  warrants or options held by the
directors.  The directors  have the option at any time to pay for any warrant or
option then exercisable  through  forgiveness of interest and principal  accrued
and outstanding.



                                      F-17
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 7.  FEDERAL HOME LOAN BANK BORROWINGS

The Bank can obtain  additional  funding as needed for  mortgage  loans from the
Federal Home Loan Bank of Atlanta  ("FHLB").  At December 31, 1999 and 1998, the
Bank had one  advance  outstanding  with a fixed  interest  rate of 6.99%.  This
advance  is  collateralized  by a  blanket  floating  lien on  qualifying  first
mortgage  loans and  pledging of the Bank's  stock in the FHLB. A summary of the
Bank's  borrowings  from the FHLB for the years ended December 31, 1999 and 1998
follows:
<TABLE>
<CAPTION>

                                                                                              1999                 1998
                                                                                       -----------------    -----------------

                      <S>                                                              <C>                  <C>
                      Balance, beginning of year ..................................... $         65,000     $      1,075,000
                         Advances ....................................................                -                    -
                         Repayments ..................................................          (10,000)          (1,010,000)
                                                                                       -----------------    -----------------
                      Balance, end of year ........................................... $         55,000     $         65,000
                                                                                       =================    =================
</TABLE>

At December 31, 1999, scheduled maturities of FHLB borrowings are as follows:

<TABLE>

                      <S>                                                                                    <C>
                      For the year ending December 31,
                         2000 .............................................................................. $        10,000
                         2001 ..............................................................................          10,000
                         2002 ..............................................................................          10,000
                         2003 ..............................................................................          10,000
                         2004 ..............................................................................          10,000
                         Due after five years ..............................................................           5,000
                                                                                                             ----------------
                                                                                                             $        55,000
                                                                                                             ================
</TABLE>


NOTE 8.  EMPLOYEE BENEFIT PLAN

The Bank has a 401(k) salary deferral plan which allows employees to defer up to
15%  of  their  salary  with  partially   matching  Bank   contributions.   Bank
contributions to this plan charged to expense amounted to $16,154 and $16,015 in
1999 and 1998, respectively.



                                      F-18
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






NOTE 9.  INCOME TAXES

Income tax expense consists of the following:
<TABLE>
<CAPTION>

                                                                                             Years Ended December 31,
                                                                                       --------------------------------------
                                                                                              1999                 1998
                                                                                       -----------------    -----------------

                      <S>                                                              <C>                  <C>
                      Current ........................................................ $        504,279     $        171,082
                      Deferred .......................................................           10,691              173,529
                                                                                       -----------------    -----------------
                                                                                       $        514,970     $        344,611
                                                                                       =================    =================
</TABLE>

The Company's  income tax expense differs from the amounts  computed by applying
the  Federal  income  tax  statutory  rates to income  before  income  taxes.  A
reconciliation of the differences is as follows:
<TABLE>
<CAPTION>

                                                                                      Years Ended December 31,
                                                                       -------------------------------------------------------
                                                                                 1999                         1998
                                                                       -------------------------    --------------------------
                                                                         Amount        Percent         Amount        Percent
                                                                       ------------   ----------    -------------   ----------

                       <S>                                             <C>                <C>       <C>                 <C>
                       Tax provision at statutory rate ............... $   489,733        34 %      $    321,738        34 %
                       Increase resulting from:
                          Other items, net ...........................      25,237         2              22,873         2
                                                                       ------------   ----------    -------------   ----------
                       Income tax expense ............................ $   514,970        36 %      $    344,611        36 %
                                                                       ============   ==========    =============   ==========
</TABLE>

The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>

                                                                                                   December 31,
                                                                                      ---------------------------------------
                                                                                            1999                  1998
                                                                                      -----------------     -----------------
                     <S>                                                              <C>                   <C>
                     Deferred tax assets:
                        Allowance for loan losses ................................... $        256,143      $        256,143
                        Non accrual loan interest receivable ........................           27,752                26,381
                        Securities available for sale ...............................           25,000                     -
                                                                                      -----------------     -----------------
                                                                                               308,895               282,524
                                                                                      -----------------     -----------------

                     Deferred tax liabilities:
                        Premises and equipment ......................................           73,172                80,192
                        Other .......................................................           21,382                 2,300
                        Securities available for sale ...............................                -                 7,000
                                                                                      -----------------     -----------------
                                                                                                94,554                89,492
                                                                                      -----------------     -----------------

                     Net deferred tax assets ........................................ $        214,341      $        193,032
                                                                                      =================     =================
</TABLE>


                                      F-19
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 10. EARNINGS PER COMMON SHARE

The following is a reconciliation  of net income (the numerator and the weighted
average shares  outstanding  (the  denominator)  used in  determining  basic and
diluted earnings per share.
<TABLE>
<CAPTION>

                                                                                  Year Ended December 31, 1999
                                                                    ---------------------------------------------------------
                                                                       Income               Shares          Per Share Amount
                                                                    (Numerator)          (Denominator)
                                                                    ---------------   ------------------   -----------------

                        <S>                                       <C>                  <C>                  <C>
                        Basic earnings per share
                           Net income ........................... $        925,422               415,104    $           2.23
                                                                                                            =================

                        Effect of Dilutive Securities
                           Stock options and warrants ...........                -                32,620
                                                                  -----------------    ------------------

                        Dilutive earnings per share
                           Net income ........................... $        925,422               447,724    $           2.07
                                                                  =================    ==================   =================
</TABLE>
<TABLE>
<CAPTION>

                                                                                  Year Ended December 31, 1998
                                                                    --------------------------------------------------------
                                                                       Income               Shares             Per Share
                                                                    (Numerator)         (Denominator)           Amount
                                                                   ----------------   -------------------   ----------------

                        <S>                                       <C>                 <C>                   <C>
                        Basic earnings per share
                           Net income ........................... $        601,678               409,305    $          1.47
                                                                                                            ================

                        Effect of Dilutive Securities
                           Stock options and warrants ...........                -                     -
                                                                  -----------------    ------------------

                        Dilutive earnings per share
                           Net income ........................... $        601,678               409,305    $          1.47
                                                                  =================   ===================   ================
</TABLE>


                                      F-20
<PAGE>


                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






NOTE 11. STOCK WARRANTS AND STOCK OPTION PLAN

Stock Warrants

In  recognition of the efforts and financial  risks  undertaken by the Company's
organizers,  the Company  granted each  organizer an opportunity to purchase one
share of common stock for each share  purchased by them in the Company's  common
stock offering.  The warrants became exercisable on the date the Bank opened for
business and are exercisable in whole or in part at any time during the ten year
period  following  that date, at an exercise price equal to $10 per share unless
the Bank is  required to raise  capital to meet  regulatory  guidelines.  In the
event this occurs,  the  exercise  price will be the greater of $10 per share or
the book  value per share of the  common  stock as  reflected  in the  Company's
quarterly  financial  report  for the  quarter  ended  immediately  prior to the
exercise of the warrant. The warrants are nontransferable, other than by will or
the laws of descent and distribution, but shares issued pursuant to the exercise
of  warrants  will  be  transferable,  subject  to  compliance  with  applicable
securities  laws.  At December 31, 1999 and 1998,  there were  137,500  warrants
outstanding.

Stock Option Plan

The Company has options  outstanding under the  stockholder-approved  1997 Stock
Option Plan (the "1997  Plan").  Options  granted under the 1997 Plan are one of
two types:  (i) those which  qualify for  treatment as incentive  stock  options
under Section 422 of the Internal  Revenue Code of 1986, as amended  ("Incentive
Stock  Options")  or (ii)  those  which do not so qualify  ("Nonqualified  Stock
Options").  The 1997  Plan  provides  that not more than  125,000  shares in the
aggregate be issued for Incentive Stock Options and Nonqualified  Stock Options.
The exercise price of an Incentive  Stock Option shall not be less than the fair
value at the date of grant.  The exercise price of a  Nonqualified  Stock Option
shall be determined by the Board on the date granted.

In addition to the options  available  under the 1997 Plan,  in April 1997,  the
Board  granted  options for 10,926  shares of common  stock with a $10  exercise
price to the President  and CEO of the Bank provided that he exercises  one-half
of the options within twelve months and the remainder within twenty-four months.
The officer exercised 5,463 options during each year ended December 31, 1999 and
1998.  At December 31, 1999,  there were no options  outstanding  outside of the
1997 Plan.


                                      F-21
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 11. STOCK WARRANTS AND STOCK OPTION PLAN (Continued)

Stock Option Plan (Continued)

A summary  of the status of the 1997 Plan at  December  31,  1999 and 1998,  and
changes during the years ended on those dates is as follows:
<TABLE>
<CAPTION>

                                                                              1999                           1998
                                                                  -----------------------------   ----------------------------
                                                                                  Weighted-                      Weighted-
                                                                                   Average                        Average
                                                                                   Exercise                       Exercise
                                                                    Number          Price           Number         Price
                                                                  ----------    --------------    ----------   --------------
                        <S>                                        <C>          <C>               <C>          <C>
                        Under option, beginning of year .........     58,117    $        10.00        39,640   $        10.00
                           Granted ..............................      4,901             11.96        20,510            10.00
                           Forfeited ............................          -                 -       (2,033)            10.00
                                                                  -----------                     -----------

                        Under option, end of year ..............      63,018             10.33        58,117            10.00
                                                                  ===========                     ===========

                        Exercisable at end of year .............      44,070                          33,992
                                                                  ===========                     ===========


                        Available for grant at end of year .....      61,982                          66,883
                                                                  ===========                     ===========


                        Weighted-average fair value per option
                           of options granted during the year ..      $ 5.55                          $ 3.97
                                                                  ===========                     ===========
</TABLE>

Additional  information  about  options  outstanding  at December 31, 1999 is as
follows:
<TABLE>
<CAPTION>


                                                                                           Options
                                                          Options Outstanding            Exercisable
                                                   ----------------------------------   ---------------
                                                                         Weighted-
                                                                          Average
                                     Exercise           Number          Contractual         Number
                                      Price          Outstanding       Life in Years     Outstanding
                                  ---------------  -----------------   --------------   ---------------
                                  <S>              <C>                 <C>              <C>


                                  $        10.00             58,218              6.7            44,070
                                           12.00              4,800             10.0                 -
                                                   -----------------                    ---------------
                                                             63,018              6.9            44,070
                                                   =================                    ===============
</TABLE>


                                      F-22
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 11. STOCK WARRANTS AND STOCK OPTION PLAN (Continued)

Stock Option Plan (Continued)

As permitted under generally accepted  accounting  principles,  grants under the
1997 Plan are accounted  for following the  provisions of APB Opinion No. 25 and
its  related  interpretations.   Accordingly,  no  compensation  cost  has  been
recognized for grants made to date. Had compensation  cost been determined based
on the fair value method  prescribed  in FASB  Statement  No. 123,  reported net
income and earnings per share would have been reduced as follows:
<TABLE>
<CAPTION>

                                                                             Year Ended December 31,
                                                        -------------------------------------------------------------------
                                                                      1999                              1998
                                                        ---------------------------------  --------------------------------
                                                                            Basic and                         Basic and
                                                                             Diluted                           Diluted
                                                              Net           Net Income           Net          Net Income
                                                             Income         Per Share          Income         Per Share
                                                        ----------------- ---------------  ---------------- ---------------

                       <S>                              <C>               <C>              <C>              <C>
                       As reported .................... $        925,422  $         2.23   $       601,678  $         1.47
                       Stock based compensation,
                          net of related tax effect ...         (29,828)          (0.07)          (52,976)          (0.13)
                                                        ----------------- ---------------  ---------------- ---------------

                       As adjusted                      $        895,594  $         2.16   $       548,702  $         1.34
                                                        ================= ===============  ================ ===============
</TABLE>

The fair value of the  options  granted  in 1999 was based  upon the  discounted
value of future cash flows of the options using the following assumptions:

  Risk-free interest rate                                              6.28%
  Expected life of the options                                         10 years
  Expected dividends (as a percent of the fair value of the stock)     0.00%
  Expected volatility                                                  0.00%


                                      F-23
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES

In the normal  course of business,  the Bank has entered into  off-balance-sheet
financial instruments which are not reflected in the financial statements. These
financial  instruments  include commitments to extend credit and standby letters
of credit. Such financial  instruments are included in the financial  statements
when funds are disbursed or the instruments  become payable.  These  instruments
involve,  to varying  degrees,  elements  of credit risk in excess of the amount
recognized in the balance sheet.

The Bank's exposure to credit loss in the event of  nonperformance  by the other
party to the financial  instrument for  commitments to extend credit and standby
letters of credit is represented by the contractual amount of those instruments.
A summary of the Bank's commitments is as follows:
<TABLE>
<CAPTION>

                                                                                                  December 31,
                                                                                      --------------------------------------
                                                                                             1999                 1998
                                                                                      -----------------    -----------------

                      <S>                                                             <C>                  <C>
                      Commitments to extend credit .................................. $      7,164,000     $      4,959,000
                      Standby letters of credit .....................................          102,500              120,000
                                                                                      -----------------    -----------------
                                                                                      $      7,266,500     $      5,079,000
                                                                                      =================    =================
</TABLE>

Commitments  to extend credit  generally  have fixed  expiration  dates or other
termination  clauses  and  may  require  payment  of a fee.  Since  many  of the
commitments  are  expected  to  expire  without  being  drawn  upon,  the  total
commitment amounts do not necessarily  represent future cash  requirements.  The
credit risk involved in issuing these  financial  instruments is essentially the
same as that involved in extending  loans to customers.  The Bank evaluates each
customer's  creditworthiness  on a case-by-case  basis. The amount of collateral
obtained,  if deemed necessary by the Bank upon extension of credit, is based on
management's  credit evaluation of the customer.  Collateral held varies but may
include real estate and improvements,  crops,  marketable  securities,  accounts
receivable, inventory, equipment, and personal property.

Standby  letters of credit  are  conditional  commitments  issued by the Bank to
guarantee the performance of a customer to a third party.  Those  guarantees are
primarily  issued to support  public and  private  borrowing  arrangements.  The
credit risk  involved in issuing  letters of credit is  essentially  the same as
that  involved  in  extending  loan to  customers.  Collateral  held  varies  as
specified above and is required in instances which the Bank deems necessary.


                                      F-24
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 12. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)

In the normal  course of  business,  the Company is  involved  in various  legal
proceedings.  In the  opinion  of  management  of  the  Company,  any  liability
resulting  from  such  proceedings  would  not  have a  material  effect  on the
Company's financial statements.


NOTE 13. CONCENTRATIONS OF CREDIT

The Bank originates  primarily  commercial,  residential,  and consumer loans to
customers  in the Coffee  County and  surrounding  counties.  The ability of the
majority of the Bank's customers to honor their  contractual loan obligations is
dependent on the economy in Douglas, Georgia and surrounding areas.

Although the Bank's loan portfolio is  diversified,  there is a relationship  in
this region  between the  agricultural  economy and the economic  performance of
loans  made to  nonagricultural  customers.  The  Bank's  lending  policies  for
agricultural    and    nonagricultural    customers    require   loans   to   be
well-collateralized  and supported by cash flows.  Collateral  for  agricultural
loans include  equipment,  crops,  livestock and land.  Credit losses from loans
related to the agricultural  economy is taken into  considerations by management
in determining the allowance for loan losses.

Approximately  seventy-two  percent  (72%) of the  Company's  loan  portfolio is
concentrated  in real estate  loans.  A  substantial  portion of these loans are
secured by real  estate in the Bank's  primary  market  area.  Accordingly,  the
ultimate  collectibility  of the loan  portfolio  is  susceptible  to changes in
market  conditions  in the Bank's  primary  market area.  The other  significant
concentrations of credit by type of loan are set forth in Note 3.

The Bank is subject to certain  statutory  requirements  which generally provide
that the Bank may not extend  credit to any single  borrower or group of related
borrowers  in excess of 15% of the Bank's  unimpaired  capital  and  surplus (as
defined by the Bank's regulatory authorities), or approximately $1,011,000.

The Bank has a  concentration  of funds on deposit at its primary  correspondent
bank at December 31, 1999 as follows:

    Federal funds sold .................................... $         645,000
    Correspondent commercial checking account .............         1,589,778
                                                            ------------------
                                                            $       2,234,778
                                                            ==================


                                      F-25
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






NOTE 14. Regulatory Matters

The Bank is subject to certain  restrictions on the amount of dividends that may
be  declared   without  prior  regulatory   approval.   At  December  31,  1999,
approximately   $817,400  of  retained  earnings  were  available  for  dividend
declaration without regulatory approval.

The Bank is subject to various regulatory capital  requirements  administered by
the federal banking agencies.  Failure to meet minimum capital  requirements can
initiate certain mandatory,  and possibly additional  discretionary,  actions by
regulators  that,  if  undertaken,  could have a direct  material  effect on the
financial  statements.  Under capital  adequacy  guidelines  and the  regulatory
framework for prompt  corrective  action,  the Bank must meet  specific  capital
guidelines that involve quantitative  measures of the assets,  liabilities,  and
certain  off-balance-sheet  items  as  calculated  under  regulatory  accounting
practices.   The  capital  amounts  and   classification  are  also  subject  to
qualitative judgments by the regulators about components,  risk weightings,  and
other factors.  Prompt  corrective  action provisions are not applicable to bank
holding companies.

Quantitative  measures  established  by  regulation to ensure  capital  adequacy
require  the Bank to  maintain  minimum  amounts  and ratios of total and Tier I
capital  to  risk-weighted  assets  and of Tier I  capital  to  average  assets.
Management believes,  as of December 31, 1999, the Bank met all capital adequacy
requirements to which it is subject.

As of December 31,  1999,  the most recent  notification  from The Office of the
Comptroller of the Currency  categorized the Bank as well capitalized  under the
regulatory  framework for prompt  corrective  action.  To be categorized as well
capitalized, the Bank must maintain minimum total risk-based, Tier I risk-based,
and Tier I leverage  ratios as set forth in the  following  table.  There are no
conditions  or events since that  notification  that  management  believes  have
changed the Bank's category.


                                      F-26
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 14. REGULATORY MATTERS (Continued)

The Bank's  actual  capital  amounts and ratios are  presented in the  following
table.
<TABLE>
<CAPTION>

                                                                                                            To Be Well
                                                                                 For Capital             Capitalized Under
                                                                                  Adequacy               Prompt Corrective
                                                       Actual                     Purposes               Action Provisions
                                             ---------------------------   ------------------------  --------------------------
                                                 Amount         Ratio          Amount       Ratio        Amount        Ratio
                                             ----------------  ---------   ---------------  -------  ---------------  ---------

         <S>                                 <C>               <C>         <C>              <C>      <C>              <C>
         As of December 31, 1999
           Total Capital to Risk Weighted Assets
                Consolidated ............... $     5,524,300      11.3%    $    3,928,000     8.0%         - - - N/A - - -
                Bank ....................... $     5,941,100      12.1%    $    3,928,000     8.0%   $    4,909,900      10.0%
           Tier I Capital to Risk Weighted Assets
                Consolidated ............... $     4,900,600      10.0%    $    1,964,000     4.0%         - - - N/A - - -
                Bank ....................... $     5,317,400      10.8%    $    1,964,000     4.0%   $    2,946,000       6.0%
           Tier I Capital to Average Assets
                Consolidated ............... $     4,900,600       7.7%    $    2,558,200     4.0%         - - - N/A - - -
                Bank ....................... $     5,317,400       8.3%    $    2,558,200     4.0%   $    3,197,700       5.0%

         As of December 31, 1998
           Total Capital to Risk Weighted Assets
                Consolidated ............... $    4,421,400       11.5%   $    3,085,200      8.0%        - - - N/A - - -
                Bank ....................... $    4,860,400       12.6%   $    3,085,200      8.0%  $     3,856,500      10.0%
           Tier I Capital to Risk Weighted Assets
                Consolidated ............... $    3,929,500       10.2%   $    1,542,600      4.0%        - - - N/A - - -
                Bank ....................... $    4,368,500       11.3%   $    1,542,600      4.0%  $     2,313,900       6.0%
           Tier I Capital to Average Assets
                Consolidated ............... $    3,929,500        7.2%   $    2,177,500      4.0%        - - - N/A - - -
                Bank ....................... $    4,368,500        8.0%   $    2,177,500      4.0%  $     2,721,900       5.0%

</TABLE>






                                      F-27
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial  instruments.  In cases where quoted market
prices are not available,  fair values are based on estimates  using  discounted
cash flow methods.  Those methods are significantly  affected by the assumptions
used,  including the discount rates and estimates of future cash flows.  In that
regard,  the derived fair value estimates  cannot be substantiated by comparison
to  independent  markets and, in many cases,  could not be realized in immediate
settlement  of the  instrument.  The use of different  methodologies  may have a
material  effect on the  estimated  fair  value  amounts.  Also,  the fair value
estimates  presented  herein are based on  pertinent  information  available  to
management as of December 31, 1999 and 1998. Such amounts have not been revalued
for purposes of these  financial  statements  since those dates and,  therefore,
current  estimates  of fair  value may  differ  significantly  from the  amounts
presented herein.

Cash and Due From Banks and Federal Funds Sold

The  carrying  amounts  of cash  and due  from  banks  and  Federal  funds  sold
approximate their fair value.

Securities

Fair values for securities classified as available for sale and held to maturity
are based on  available  quoted  market  prices.  The  carrying  values of other
investments with no readily determinable fair value approximate fair values.

Loans

For variable-rate  loans that reprice  frequently and have no significant change
in credit risk, fair values are based on carrying  values.  For other loans, the
fair values are  estimated  using  discounted  cash flow models,  using  current
market  interest  rates  offered for loans with  similar  terms to  borrowers of
similar  credit  quality.  Fair values for impaired  loans are  estimated  using
discounted  cash  flow  models  or  based on the  fair  value of the  underlying
collateral.


                                      F-28
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

Deposits

The carrying amounts of demand deposits and savings deposits  approximate  their
fair  values.  Fair  values for  certificates  of deposit  are  estimated  using
discounted  cash flow models,  using current  market  interest  rates offered on
certificates with similar remaining maturities.

Federal Funds Purchased

The carrying amounts of Federal funds purchased approximate their fair values.

Notes Payable

For variable-rate  notes payable that reprice  frequently,  the carrying amounts
approximate fair values.

Federal Home Loan Bank Borrowings

The fair values of the Company's  borrowings  from the FHLB are estimated  using
discounted  cash flow models,  using current  market  interest  rates offered on
similar types of borrowing arrangements.

Off-Balance Sheet Instruments

Fair values of the Company's  off-balance sheet financial  instruments are based
on fees charged to enter into similar agreements. However, commitments to extend
credit and standby letters of credit do not represent a significant value to the
Company until such commitments are funded. The Company has determined that these
instruments do not have a distinguishable  fair value and no fair value has been
assigned.



                                      F-29
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 15. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

The estimated fair values and related carrying values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>

                                                              December 31, 1999                    December 31, 1998
                                                       ---------------------------------   ----------------------------------
                                                          Carrying            Fair              Carrying            Fair
                                                           Amount            Value               Amount            Value
                                                       ----------------  ---------------   -----------------  ---------------
                  <S>                                  <C>               <C>               <C>                <C>
                  Financial assets:
                     Cash and due from banks and
                        Federal funds sold ........... $     4,922,212   $    4,922,212    $     11,583,359   $   11,583,359
                                                       ================  ===============   =================  ===============

                     Investments in securities ....... $     8,256,603   $    8,207,793    $      4,753,962   $    4,753,962
                                                       ================  ===============   =================  ===============


                     Loans ........................... $    54,168,453   $   54,219,600    $     41,989,950   $   40,869,961
                     Allowance for loan losses .......       1,422,689                -           1,274,285                -
                                                       ----------------  ---------------   -----------------  ---------------

                                Loans, net ........... $    52,745,764   $   54,219,600    $     40,715,665   $   40,869,961
                                                       ================  ===============   =================  ===============


                  Financial liabilities:
                     Noninterest-bearing demand ...... $    11,090,409   $   11,090,409    $     12,695,085   $   12,695,085
                     Interest-bearing demand .........      13,136,785       13,136,785          11,707,125       11,707,125
                     Savings .........................       1,999,607        1,999,607           1,973,434        1,973,434
                     Time deposits ...................      34,647,620       34,810,000          27,924,709       28,070,996
                                                       ----------------  ---------------   -----------------  ---------------

                                Total deposits ....... $    60,874,421   $   61,036,801    $     54,300,353   $   54,446,640
                                                       ================  ===============   =================  ===============


                  Federal funds purchased ............ $     1,250,000   $    1,250,000    $              -   $            -
                                                       ================  ===============   =================  ===============

                  Notes payable, director ............ $       500,000   $      500,000    $        500,000   $      500,000
                                                       ================  ===============   =================  ===============

                  Other borrowings ................... $        55,000   $       53,700    $         65,000   $       64,500
                                                       ================  ===============   =================  ===============
</TABLE>


                                      F-30
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 16. PARENT COMPANY FINANCIAL INFORMATION

The following  information presents the condensed balance sheets of FNC Bancorp,
Inc.  and  statements  of income  and cash  flows as of and for the years  ended
December 31, 1999 and 1998.
<TABLE>
<CAPTION>

                                                       CONDENSED BALANCE SHEETS
                                                                                               1999                 1998
                                                                                       ------------------    -----------------

                   <S>                                                                 <C>                   <C>
                   Assets
                      Cash ........................................................... $         169,709     $        136,439
                      Investment in subsidiary .......................................         5,268,408            4,382,517
                      Other assets, due from subsidiary ..............................           336,909                    -
                                                                                       ------------------    -----------------

                              Total assets ........................................... $       5,775,026     $      4,518,956
                                                                                       ==================    =================

                   Liabilities
                      Notes payable, directors ....................................... $         500,000     $        500,000
                      Other liabilities ..............................................           423,434               75,416
                                                                                       ------------------    -----------------

                              Total liabilities ......................................           923,434              575,416
                                                                                       ------------------    -----------------

                   Stockholders' equity ..............................................         4,851,592            3,943,540
                                                                                       ------------------    -----------------

                              Total liabilities and stockholders' equity ............. $       5,775,026     $      4,518,956
                                                                                       ==================    =================

</TABLE>


                                      F-31
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)

                         CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>


                                                                                             1999                 1998
                                                                                      -----------------     ----------------

                   <S>                                                                <C>                   <C>
                   Income, interest ................................................  $          6,481      $         2,467
                                                                                      -----------------     ----------------

                   Expense
                      Interest .....................................................            35,455               36,872
                      Other expense ................................................             6,495               20,674
                                                                                      -----------------     ----------------
                                                                                                41,950               57,546
                                                                                      -----------------     ----------------

                              Loss before income tax benefits and
                                  equity in undistributed earnings
                                                     of subsidiary .................          (35,469)             (55,079)

                   Income tax benefits .............................................          (12,000)             (16,847)
                                                                                      -----------------     ----------------

                              Loss before equity in undistributed
                                   earnings of subsidiary ..........................          (23,469)             (38,232)

                   Equity in undistributed earnings  of subsidiary .................           948,891              639,910
                                                                                      -----------------     ----------------

                              Net income ...........................................  $        925,422      $       601,678
                                                                                      =================     ================
</TABLE>


                                      F-32
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)

                       CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                             1999                  1998
                                                                                     -------------------   -------------------
                    <S>                                                              <C>                   <C>
                    OPERATING ACTIVITIES
                       Net income .................................................  $          925,422    $          601,678
                                                                                     -------------------   -------------------
                       Adjustments to reconcile net income to net
                          cash provided by (used in) operating activities:
                          Undistributed earnings of subsidiary ....................            (948,891)             (639,910)
                          Increase in due from subsidiary .........................            (336,909)                    -
                          Decrease  in deferred tax assets ........................                   -                27,876
                          Increase  in interest payable ...........................              27,999                36,871
                          Increase  in taxes payable ..............................             320,019                     -
                                                                                     -------------------   -------------------

                            Total adjustments .....................................            (937,782)             (575,163)
                                                                                     -------------------   -------------------

                            Net cash provided by (used in) operating activities ...             (12,360)               26,515
                                                                                     -------------------   -------------------

                    FINANCING ACTIVITIES
                       Purchase of treasury stock .................................              (9,000)                    -
                       Proceeds from issuance of common stock .....................              54,630                54,630
                                                                                     -------------------   -------------------


                            Net cash provided by financing activities .............              45,630                54,630
                                                                                     -------------------   -------------------

                    Net increase in cash ..........................................              33,270                81,145

                    Cash at beginning of year .....................................             136,439                55,294
                                                                                     -------------------   -------------------

                    Cash at end of year ...........................................  $          169,709    $          136,439
                                                                                     ===================   ===================

</TABLE>


                                      F-33
<PAGE>